A Memphis judge late yesterday postponed contempt action against striking police union leaders as bargainers in a week-long municipal strike reported a settlement in sight.

Chancellor George Lewis continued a court hearing until this morning to allow negotiators for the city and striking police and fire unions to iron but their differences in a settlement.

Mayor Wheth Chandler said the city would be willing to accept a 7 1/2 percent wage increase coupled with a two-year contract. But union negotiators, while buying the wage figure, have insisted upon a one-year contract.

The two sides in the dispute were in telephone contact through the day with federal mediators acting as go-betweens. Ed McMahon, a federal mediator, said, "I don't understand this strike. It's emotional. The economic issue, you can't weigh it. It's all emotional."

George Meany, president of the AFL-CIO, sent telegrams yesterday to Chandler and Tennessee Gov. Ray Blanton calling for binding arbitration to end the dispute. There was no immediate response to the proposal from the mayor's office, but Chandler has stood fast during the strike in opposition to binding arbitration.

Late yesterday, attorneys for the city appeared in chancery court seeking to place police union president David Baker and Chris Cothran, another union leader, in contempt of court for violating court orders to end the strike.

But Russell X. Thompson the union's attorney, told the court that a settlement of the strike was imminent.

"If the city feels it more important to put Chris Cothran and David Baker in jail than to settle this strike, then that's their (the city's) option," Thompson said.

"We should keep in mind a common objective, and that is ending the strike. We are very very close to settling this matter," Thompson said.

Early in the day an estimated 4,500 strikers and their supporters marched through downtown Memphis to City Hall.

Stike supporters circulated recall petitions seeking Chandler's removal from office. Strikers carried placards reading, "Applications for mayor accepted. High pay. No intelligence."

Union leaders urged their members to remain peaceful on the picket lines.

The local AFL-CIO has threatened a work stoppage by its 60,000 members next week if the strike is not settled.

Predictions that the strike would spread to city schools on opening day yesterday proved to be unfounded. There were no picket lines at the schools, buses ran on schedule and unionized teachers showed up for work.

Sanitation workers, who recently signed a contract with the city, also worked a routine schedule.

And overnight, fire and police officials reported a peaceful night.