A slide in HSBC shares failed to halt the upward momentum of the London market as the FTSE 100 Index moved closer to a record high.

The banking giant finished 3% lower after a 9% rise in annual profits to £13.6 billion failed to meet the lofty forecasts of the City.

The wider market spent much of the session treading water but the impact of a strong start to trading on Wall Street, where there was another record high for the S&P 500, left the FTSE 100 Index 27.8 points higher at 6865.9.

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The top flight is now within 100 points of its record close of 6930 seen in December 1999, having just risen for three weeks in a row. In a quiet session on currency markets, the pound was flat against the US dollar and euro at 1.66 and 1.21 respectively. Vodafone's long-awaited sale of its stake in US operator Verizon Wireless has been a big factor in the continued strong performance of the FTSE 100.

As well as realising £49 billion for investors in the shape of cash and shares, the City has been excited by the mobile giant's prospects going forward. Shares added another 15.8p to 252.3p. In light of its profits miss, HSBC fell 18.5p to 635.7p as it warned that conditions in emerging markets were likely to remain choppy.

The other big development came in the FTSE 250 Index after Dixons Retail Group and mobile phone retailer Carphone Warehouse said they were in talks over a potential merger.

Dixons, which trades as PC World and Currys in the UK, surged 7% or 3.1p higher at 50.3p, while Carphone was 27p stronger at 333p. A tie-up would create a new company worth more than £3.5bn as both Dixons and Carphone have market valuations in the region of £1.8bn.

For Dixons, it would offer a convenient way to meet its growth ambitions in the mobile phone market, where it currently has a partnership with Phones4U.

Elsewhere, More Than insurer RSA was 3.7p lower at 97.5p after it confirmed it was considering plans for a rights issue in order to shore up its balance sheet. It has been reported that new chief executive Stephen Hester is planning to tap investors for as much as £800 million. RSA is due to provide an update in its annual results on Thursday.

Associated British Foods was 73p lower at 2920p as it said it expects first half profits to be in line with 2013, with an "excellent" performance from its Primark stores offset by a slump in trading in its sugar business.

Outside the top flight, shares in Mothercare were 3p higher at 250.5p after the under-pressure retailer announced the surprise resignation of chief executive Simon Calver.

The biggest FTSE 100 risers were Bunzl up 102p at 1585p, Vodafone ahead 15.8p at 252.3p, and William Hill up 14p at 371.4p.

The biggest fallers were RSA Insurance down 3.7p at 97.5p, HSBC Holdings off 18.5p at 635.7p, and Associated British Foods down 73p at 2920p.