Britain's top shares rebounded on Wednesday, recouping some of their losses earlier in the week as energy company BG Group gained on bid speculation and as grocer Sainsbury rose after beating market forecasts with its quarterly figures.
Sainsbury was up 1.6 percent after it reported a fifth straight quarter of sales increases. "This was miles ahead of expectations, and there were no words on inappropriate costs to defuse the enthusiasm," said analyst Philip Dorgan at broker Panmure.
Mobile phone giant Vodafone rallied 2 percent, partly recovering from a fall triggered by Tuesday's proposed EU telecoms regulations, which would halve the cost of using a mobile phone abroad.
The FTSE 100 index was up 23.5 points at 5,959.2 by the close - recovering about a quarter of its loss over the previous two sessions in steady volume of 2.5 billion shares. Vodafone and energy stocks accounted for most of the rise.
Analysts said the market's drop on Monday and Tuesday was possibly exacerbated by fund managers' locking in profits towards the end of the first quarter but added that stocks remained attractive on a longer-term view.
"That's probably been the reason for some of the selling pressure - end-of-quarter window dressing - but in terms of what moved the market up to 6,000 the underlying story is very much still there," said Richard Hunter, head of UK equities at Hargreaves Lansdown.
"We're still seeing M&A activity, we're still seeing corporate earnings. Nothing has really changed, and we've had a 100 point fall over the last couple of days. It's simply been overdone."
Take-over talk continued to feed investor appetite for shares, this time settling on BG Group. Its shares rose 4.3 percent amid speculation of interest from US energy giant Exxon, and other oils caught the consolidation mood, backed up by crude prices around $66. BP and Royal Dutch both gained about 1 percent.
"If there is a bid for BG, and clearly the market wants to believe it, it is probably going to keep us alive for the rest of the week," said one trader.
But smaller energy stock Burren Energy stood out among mid-cap fallers with a 7.3 percent drop as investors bet the oil explorer would have to revise down its estimates for a field it is drilling in Congo.
The drop was sparked after Tullow Oil, which has a stake in the same area, gave a forecast for the amount of oil in the M'Boundi field that analysts said was lower than Burren's estimates.
"Burren announce their results tomorrow, with revised reserve estimates expected. We believe the shares remain expensive, and the reaction to the news is not overdone," said Richard Rose, an analyst at Oriel Securities.
Sugar and sweetener group Tate & Lyle also lagged the broader market, down 1.8 percent despite saying that overall trading had been generally encouraging since its last update in January. Traders pointed to competition worries for its key sweetener, sucralose, after a report that India-based Pharmed Medicare was working on its own sucralose plant.
Back on the upside, InterContinental Hotels rose 3 percent, even though buyers were no longer entitled to a dividend payment, after investment bank UBS raised its rating on the stock to "buy".
Other ex-dividend stocks fell, including Scottish & Newcastle, which lost 3.1 percent, and BSkyB, which slipped 0.5 percent.
The heaviest FTSE 250 faller was software developer iSoft, which slumped nearly 16 percent after Accenture, its US partner in a project to upgrade information technology of the UK's public health service, blamed the UK company for what it said were significant delays.
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