Export-oriented firms led British shares higher on Monday as a weaker pound stood to made them more competitive, while hopes of a bidding war boosted satellite provider Inmarsat. Investors were cautious, however, as the pound's weakness resulted from an unexpected decline in UK factory output in April, raising concern that the British economy's sluggish start to the year continued.
The FTSE 100 index ended up 0.7 percent at 7,737.43, its highest close in a week and helped by gains in big international companies such as British American Tobacco and Diageo, up 1.2 and 2.4 percent respectively.
"Defensive stocks are dominating the FTSE leaders, suggesting a still cautious investor attitude, rather than the genuine risk-on start to the week," said Artjom Hatsaturjants, analyst at Accendo Markets.
Sterling slid by more than half a cent against the dollar after the data showed factory output fell in April at the fastest pace since 2012.
Shire turned lower after Reuters reported that a group of Takeda Pharmaceutical was building support to block the $62 billion acquisition of the London-listed drug maker. Shire shares fell 0.1 percent.
The group holds one percent of Takeda's shares, and needs the support of a third of shareholders.
Among mid caps, Inmarsat was a stand-out gainer, surging 12.6 percent. The satellite firm rejected on Friday a takeover approach from US firm EchoStar, saying it significantly undervalued the company. That raised hopes of a possible bidding war.
"We believe the situation could become a bidding war between multiple potential bidders," said RBC Capital Markets. BCA Marketplace jumped 11.9 percent to a record high after rejecting a share buyout offer from private equity firm Apax Partners.
Inmarsat and BCA's gains helped send the mid-cap FTSE 250 index to end up 0.75 percent.
On the FTSE, NMC Health rose 3.8 percent after the healthcare provider formed a joint venture with Hassana Investment to create a healthcare platform in Saudi Arabia.
"This helps further extend a 2016 move into Saudi Arabia, a rather significant geography for growth," said Mike van Dulken, analyst at Accendo Markets.
Steel producer Evraz rose 7.5 percent after Fitch upgraded its credit rating.
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