London shares recovered to end the day above 4700 yesterday after healthcare stocks led Wall Street higher.

After slipping more than 33 points in early trading, the FTSE 100 made up some of its losses to end the session down 24.8 at 4703.9.

US stocks rose after drugs group Merck forecast a smaller earnings decline for next year than some analysts expected.

Broker Lehman Brothers' opinion of engineering group General Electric improved, giving US shares a boost.

The Dow Jones responded positively to the upbeat corporate news, climbing 42 points to 10482 shortly after the close of trading in London.

There were positive economic pointers at home as a leading academic said the forecast for the housing market next year was one of bright intervals and scattered showers rather than storm clouds.

Open University Business School economist Martin Upton said doom and gloom surrounding property prices was overdone.

But it was a downbeat picture on the corporate front, with major mining, oil and aerospace stocks in the red.

Mining companies were among the heaviest fallers as they reeled from the second broker downgrade in as many days.

Xstrata was the biggest loser in the sector, falling 19p to 871p, while Rio Tinto weakened 32p to 1442p.

BHP Billiton was down 12p at 572p while Anglo American fell 20p to 1185p.

The price of crude oil for delivery next month rose 2.2 per cent to $42.35 a barrel in New York after a government report that US inventories of heating oil and diesel increased less than expected. Despite that, BP was down 7p at 507p, Shell drifted 4p to 430p and Cairn Energy slipped 65p to 1373p.

International banking group Standard Chartered fell two per cent, or 21p, to 961p, after Dresdner Kleinwort Wasserstein downgraded the stock following what it described as a weak trading statement.

Those trying to lift the mood included brewer Scottish & Newcastle, whose stock rose 3p to 434p after it announced a deal to run an additional 364 pubs for newly-formed Globe Pub Company.

Transport group Stagecoach topped the FTSE 250 risers, climbing 13 per cent, or 13p, to 114p, after the performance of its London bus operation helped it to beat expectations for half-year profits.

Rival second-flight group National Express followed in its footsteps, rising 11p to 779p.

Utility group Kelda was another riser, up 1p at 564p, after its core Yorkshire Water business continued to perform well, offsetting the impact of the weak US dollar on its business across the Atlantic