Britain's top companies rose for the fifth session in a row on Monday, led by strength in mobile phone operators Vodafone and smaller rival mmO2 and aided by falling oil prices, which calmed fears that UK company profits will be pinched. MmO2 was the top gainer, up 1.4 percent, as the market wagered both companies when they report results this week and as hopes for a bid for mmO2 returned.
Dealers said a press report that mmO2's chief executive, Peter Erskine, met the chairman of Telefonica, Cesar Alierta, triggered speculation that the Spanish firm might bid for the company and helped to boost the shares. Telefonica said it was unaware of any talks, while mmO2 declined comment.
"We do not think that there will be short-term news on any deal as Telefonica is still closing its last deal, and in addition, there are obstacles similar to those faced by KPN in its proposed bid for mmO2," said an unidentified analyst from investment bank Dresdner Kleinwort Wasserstein in a report.
The bluechip FTSE 100 share index ended up 9.2 points, or 0.2 percent, at 4,803.1 - its highest level since June 2002. Total market volume was roughly half that seen last week as 1.7 billion shares traded. But many market watchers remain confident that the index will continue its ascent. It has risen 3.8 percent this month as oil prices have fallen. They sank to an eight-week low on Monday of under $46 a barrel.
Robert Parkes, UK equity strategist at HSBC Securities, said a continuation of this trend could potentially drive up the FTSE.
"The fundamentals are good for the market and equities will outperform other asset classes. In terms of valuation the UK is better than pan-Continental Europe, but there are risks," he said.
These he said were the exposure of heavily weighted banking stocks to the property sector, the potential for interest rates to rise again and the impact of falling oil prices on index behemoth BP. HSBC's preferred sectors are drugs and telecoms, and its least favoured is general retail.
Shares in British pharmaceuticals distributor Alliance Unichem Plc gained as investors welcomed forecast-busting results and positive comments from rival Celesio. Europe's top drug distributor Celesio increased its earnings guidance for the year after third-quarter pretax profits rose by a third, beating consensus estimates. Alliance Unichem's shares were up 1.3 percent to 682 pence.
Elsewhere, Cadbury Schweppes's, the world's biggest confectioner, saw its stock rise after rival Wm Wrigley Jr Co said it was buying the Life Savers and Altoids candy and mint businesses from Kraft Foods Inc.
Among second-line telecoms stocks, corporate provider Thus rose 8.8 percent after the company said it [expects to post a net profit in the first half of next year] and on relief its performance did not get any worse, dealers said. But shares in media firm Chrysalis tumbled more than 6 percent after the company warned of weak trading conditions in radio broadcasting. Dealers said the radio outlook came as a surprise as it had been trading well until October.
Emap, which owns Kiss FM radio station, led blue-chip fallers with a drop of 3.1 percent, while mid-cap firms GWR and Capital Radio- which plan to merge - fell about 3 percent each.
Among merger and acquisition situations, shares in Novar rose 4.8 percent after a weekend press report said US manufacturing giant General Electric Co was considering a bid for the building supplies business.
One of the day's top traded companies was small-cap office firm Regus Group Plc, with over 37 million shares changing hands. The market has been awash with talk recently of a bid for the firm from the United States. But dealers said today's volume was more likely to be institutional buying than stake building.