Britain's top shares rose for the second session in a row on Tuesday, lifted by mobile phone giant Vodafone after a series of meetings with banks boosted confidence in the company's margins and strategy.
Banks lent support, with Lloyds TSB the latest target of take-over speculation, with dealers reporting market talk that Deutsche Bank may be casting an eye over its British rival, the latest target of takeover speculation in the sector.
Both Lloyds TSB and Deutsche Bank declined to comment and many dealers said the unlikely in the short term.
Banks and telecoms accounted for all of the FTSE-100's gain. The benchmark closed up 8.5 points, or 0.2 percent, at 4,358.7, off an earlier high at 4,373.7, but adding to Monday's 49-point rally.
Gains on Wall Street added muscle after a clutch of upbeat US data releases - including housing starts and consumer prices - soothed fears that the economic recovery in the world's largest economy was faltering.
Although the FTSE has remained entrenched in its tight trading range in the quiet summer months, market observers said a fall in scorching oil prices and a growing consensus that interest rate rises in the UK may peak soon could trigger a move higher in the near term.
"If you see any sharp fall off in the oil price over the next few weeks I think that would be a strong positive for the market," said Graham Secker, UK equity strategist at Morgan Stanley.
"People are now beginning to see the top of interest rates. If rates have peaked in the UK we expect banks to do well."
Vodafone rose 1.4 percent after the company met with analysts at Deutsche Bank, the latest in a series of meetings the company has held with analysts and fund managers over the summer.
The telecoms sector was also given a lift by an upbeat sales forecast from US mobile phone maker Motorola.
But hotels and gaming group Hilton was the top blue chip gainer, up 3.1 percent, ahead of its interim results next week. Dealers said they expected the figures to be good, adding that gains for US peers overnight had lifted sentiment in the stock.
British Airways also rose, gaining 2.3 percent after it improved its pay offer in a bid to stave off a planned 24-hour strike.
Elsewhere on the upside, shares in do-it-yourself retailer Kingfisher rose 1.1 percent, boosted by surging profits at US home improvements company Home Depot, dealers said.
Beaten down media stocks rebounded, with publisher Emap and global news and information firm Reuters both adding 2.5 percent.
"The market is very buoyant today, which is a change, and Reuters tends to follow the market," Investec analyst Meg
Geldens said, noting that other media stocks, such as Emap and WPP, also were on the rise.
Among mid-caps steel-maker Corus dipped 1.1 percent after it was downgraded to "equal-weight" by analysts at Morgan Stanley.
In contrast Anglo-Dutch computer services firm LogicaCMG rose 3.4 percent after Deutsche Bank repeated its "buy" rating on the stock and said it was set to buy Portuguese IT unit Edinfor.
Logica is one of two bidders short-listed by Portugal utility EDP to buy Edinfor assets and win an outsourcing contract, which it hopes will help it expand its Iberian operations. EDP and Logica both said a decision on the deal had not yet been made.