THE City breathed a monumental sigh of relief when the FTSE 100 Index finally broke its record 11-day losing streak.

Despite falling ten points shy of the psychologically-important 3,500 mark, a 9.2 gain on the day was enough to raise spirits.

Traders were kept on tenterhooks throughout a rollercoaster ride as share prices lurched up and down.

Early trading got the day off to a positive start with the Footsie racing ahead by 60 points but this was pegged back and dipped below Monday night's close of 3480.8 for the first time at noon.

Two hours later, it was back in the black, only to give stockbrokers a late scare by again plunging below shortly before 4pm.

A late rally spared the blushes and anguish which has gripped the City for much of the past fortnight.

Despite a lift in spirits, brokers were realistic about the significance of the day's trading.

Justin Urquhart-Stewart, director at stockbroker Seven Investment Management, said: "The fact that we have stopped falling for now is marginally encouraging.

"But all this is, is a ledge. As to whether or not we fall off that ledge, we'll have to wait and see. Nothing else has changed."

The negative sentiment in the City was not aided by an announcement from blue-blooded stockbroker Cazenove which said it was postponing a planned share sale until market conditions improved.

The looming conflict in Iraq and general economic malaise was again blamed for a lack of enthusiasm on behalf of the traders.

Downing Street had taken the unusual step of trying to reassure investors that the fundamentals of the British economy were sound.

Prime Minister Tony Blair's official spokesman said: "The fall in the market here is being mirrored in other markets across Europe and across the world, so that's an important factor to bear in mind."

Improved trading on Wall Street was likely to have helped shares pick-up.

The Dow Jones Industrial Average had risen 50 points by the time the Footsie closed on Monday and ahead of President George W Bush's State of the Nation speech late last night.

Analysts expect most investors to sit on the sidelines until the President updates the world on his stance.

He is certain to provide further clues on the possible timing of any military action against Saddam Hussein.

UK traders were not confident that the gains signalled the start of a longer-term rally