A flurry of merger activity helped shares on Wall Street scale new peaks on Monday and pushed London’s FTSE 100 to a 14-year closing high. But analysts warned the strong gains were yet to be supported by brighter news from the global economy.

The UK’s index of blue-chip shares closed up at 6865, up 28 points on the day and within striking distance of the all-time closing high of 6930 on 30 December 1999, the peak of the dotcom boom.

The London market was lifted by a rally on Wall Street, where the S&P 500 hit a record high before falling away to close 0.62% up at 1847. The Dow Jones industrial average closed 0.6% up at 16207 and the Nasdaq Composite Index rose 0.69% to 4292.

A spurt of takeover action has driven up investor confidence in recent days, lead by Facebook’s mega deal to buy mobile messaging service WhatsApp for $ 19bn (£11.4bn). As well as the merger talks between Dixons and Carphone Warehouse in the UK, in the US , RF Micro Devices agreed a $ 1.6bn deal to buy Triquint Semiconductor.

Stockmarket experts in the US reckoned shares were beginning to look overvalued against a backdrop of economic data that has often disappointed in recent weeks. Economists point to an unusually harsh winter hitting construction, manufacturing and the labour market but they are divided over how quickly indicators will recover as the weather improves.

In the UK, the news on the economy has been more positive and some market watchers predict the FTSE 100 will reach 7000 points in the coming months. The index has also been buoyed by a £49bn cash-and-shares payout from Vodafone flowing into investors’ pockets and yesterday saw an extra boost from packaging group Bunzl – its shares rose almost 7% to close at £15.85 after the company reported a jump in profits and revenues.

“Bunzl and Vodafone are looking good. We’ve got a 7000 target for the FTSE in the next few months,” said Mark Ward, head of execution trading at Sanlam Securities.

European shares were also at multi-year highs, helped by positive news from German businesses. The latest IFO survey showed a rise in the business climate index to 111.3, up from 106.6 – the highest in more than two-and-a-half years. But economists cautioned that the detail was not all upbeat.

“The latest increase … was entirely due to a further rise in the index of current conditions, with the survey measure of business expectations slipping back,” said Chris Scicluna at Daiwa Capital Markets.

Timo Klein, senior German economist at IHS Global Insight, said the latest report from Germany bolstered hopes that the “constraints that the German economic recovery has been facing since roughly mid-2011, most notably eurozone debt crisis concerns, are progressively waning.”

Germany’s DAX index of shares gained 0.5% on the day. Spain’s IBEX rose 1.2% after Moody’s decision on Friday night to raise the country’s sovereign debt rating by a notch to Baa2.