The feelgood factor was in evidence again in the City yesterday as the FTSE 100 Index edged towards a key milestone.

Positive results from the likes of BAE Systems and Dixons heralded fresh gains for the index as it moved within striking distance of a new three-and-a-half year high.

The Footsie closed 6.7 points higher at 5365.9, meaning it has now added more than 140 points in less than a fortnight.

Progress has also been underpinned by a rally on the Dow Jones Industrial Average, despite reports that Hurricane Katrina will cut employment by 400,000 people in coming months and trim economic growth by as much as one per cent in the second half of this year.

In London, BAE Systems picked up more than one per cent, or 3.75p, to 334p after impressing the City with a record order book and better-than-expected half-year earnings growth of more than 20 per cent.

Dixons was up 1.25p to 155.25p, as investors breathed a sigh of relief that an AGM statement did not reveal a poorer picture on sales. The like-for-like figure for the Dixons group was off three per cent.

But the highest top flight climber was recruitment specialist Hays after an upbeat note from Morgan Stanley. The stock cheered nearly four per cent, or 4.5p, to 130.25p.

In contrast, broadcaster ITV was unchanged at 114.5p after indicating an improved trend for its under-pressure advertising revenues as it posted a 60 per cent hike in first-half profits to £205m.

Among those to miss out on the spending spree by investors was cigarettes giant Gallaher, which fell 3p to 855p, after reporting another decline in the UK cigarette market and four per cent lower half-year profits.

Outside the top flight, property group Savills gained more than 16 per cent, or 119p, to 849p, after forecasting a strong second half of the year.

Associated British Ports also made progress, adding 18.25p to 484.5p after it told investors that its UK ports business was set for further growth in the second half of its financial year, building on an eight per cent rise in underlying profits in the six months to June 30.

Investors in PartyGaming found little consolation in a small rise in shares of the online poker giant - up a penny to 106p. It came after more than £2bn was wiped off the value of the company yesterday.

Sportswear firm Umbro lost seven per cent of its value, off 9.75p to 126p, despite revealing sales of its footwear were 25.4 per cent higher in the six months to July 3 and that demand rose for all other branded categories such as clothing and sports equipment.

In contrast, airline easyJet advanced 0.75p to 290p after cheering investors with news that it carried 18 per cent more passengers in August compared with the same month last year.

The biggest Footsie risers were Hays, up 4.5p at 130.25p, British Airways, ahead 9.5p at 289.75p, Enterprise Inns, up 27.5p at 872p, and William Hill, ahead 18p at 584p