Britain's leading share index closed 1.1 percent up on Monday, led by gains in banks and mining shares, while supermarket chain J.Sainsbury rose on fresh speculation of a bid.
Mining stocks boosted the FTSE 100 index as BHP Billiton, and Anglo American rose over 2 percent. Miners were hit last week by news that China had raised interest rates in a move to slow its economic growth but dealers said the market now believed China's growth was likely to stay robust and fuel demand for metals, while copper prices remained firm.
The FTSE 100 closed 49.6 points up at 4,673.8, scoring its biggest one-day points gain in a month.
But volume of 1.5 billion shares was well below usual turnover, a measure of investor caution ahead of Tuesday's US presidential election, which polls show too close to call between incumbent George W. Bush and challenger John Kerry.
Harpreet Kondal, a trader at brokers Blue Index, said markets were dreading a repeat of the closely-fought 2000 US elections which left markets in limbo during weeks of legal wrangling.
"Let's hope that we get a decisive winner in the US election because it would just be a nightmare to be caught in stasis again," said Kondal.
"If the election result is clear cut I expect the market to rally quite strongly. So long as the election doesn't get into a drawn-out proceeding the FTSE should be challenging 4,700 quite quickly," said Martin Dobson, at brokers Hoodless Brennan.
Oil shares, strong for most of the session, pared gains in the last half hour of business as crude prices slipped rapidly ahead of the US election, with some in the energy markets speculating Democratic challenger Kerry was set to win, which could soothe the geopolitical friction that helped spark this year's crude rally.
BP finished 0.9 percent higher at 532 pence after touching 538-1/2p. Banks came back into favour, with Barclays and HBOS both rising more than 1 percent.
Sainsbury was top FTSE gainer, rising 3.7 percent after weekend reports added to talk that private equity firms could be lining up a bid, potentially headed by former Asda bosses Allan Leighton and Archie Norman, after both appeared to be dropping other interests.
Kondal at Blue Index said a bid for Sainsbury could warm up a FTSE index, which has few technical impediments up to 5,000 points if it can break out above 4,750.
"There's nothing much holding the FTSE back beyond 4,750 in terms of the technicals. If a bid comes to fruition the bulls will be back in town and it could act as a catalyst for them to put their money on the table," he said.
Services firm Hays closed at 119-1/2 pence, up 2.5 percent from Friday's adjusted closing price, as it started trading as a pure recruitment company after the demerger of its mail services arm DX Services arm took effect. Hays also said its main business was trading in line with expectations.
Medical devices firm Smith & Nephew rose 2.9 percent to 476p ahead of third-quarter results this week, when the company is expected to deliver a relatively upbeat message. Investment bank Morgan Stanley started coverage on the stock with an "overweight" rating and 542p price target.