A fresh bout of merger talk pushed the FTSE 100 index to its second straight five-year closing high on Thursday, within a whisker of the key 6,000 level it has not broken since March 2001.
Insurer Royal & Sun Alliance closed 4.7 percent higher at 138-1/4 pence, running up in late business on talk of a possible bid pitched at 160-170p per share.
"No names have been mentioned, but the talk is centring on a bid at 165 pence a share," said a trader.
Speculative action pushed shares in telecoms operator BT Group 3.9 percent higher, with traders reporting a revival of last week's talk of interest from venture capitalists. They added that covering ahead of Friday's expirations of futures and options contracts was also tweaking the shares higher.
Investec strategist Roger Cursley said the market, calm until a late-session flurry, felt as though it was running out of steam after a run that has pushed the FTSE up 6.7 percent since the beginning of the year.
"It's all getting a bit carried away to my mind, but there's an awful lot of money burning holes in VCs' (venture capital companies) pockets," he said.
The FTSE 100 closed 28.1 points higher at 5,993.2, its highest close since March 2001, just down from a top of 5,995.2. The Midcap 250 index closed up 85.9 points at a fresh record high of 9,814.9.
"We've got triple witching tomorrow. There's probably a good chance that we've got a few more days of momentum. The market wants to test the 6,000 level, it may well break through it short term," said Cursley.
Anglo-Dutch steelmaker Corus was top FTSE gainer, up nearly 12 percent after it met forecasts for 2005 earnings and said it planned to sell its aluminium rolled products and extrusions business for 826 million euros to US company Aleris. "The figures were in line, there was a confident statement, and the deal's got a good price," said a trader.
Insurers were a focal point on Thursday, with Prudential rising 3.7 percent. Britain's second-biggest listed life insurer said 2005 operating profit was ahead of market expectations, posting a 33 percent rise on 2004.
Royal & Sun Alliance was back at the centre of bid talk, possibly the target for private equity investors. Last year UK financier Andrew Regan set his sights on RSA but subsequently decided not to pursue a bid. The shares have periodically been sensitive to bid rumours since then.
Mobile phone firm Vodafone closed up 2.4 percent on fresh talk of a bidding war for its Japanese operations.
Cerberus Capital Management and Providence Equity Partners are planning a $15 billion rival bid for the UK firm's Japanese operations, sources familiar with the situation said, potentially derailing Vodafone's talks with Softbank.
Mining stocks were broadly weaker, giving up gains from Wednesday, with copper miners Kazakhmys and Antofagasta both down around 2 percent after the price of the metal fell back.
Retailers also came under pressure when British retail sales data showed January's huge decline was even sharper than previously reported, offsetting news of a better-than-expected sales gain in February.
Kingfisher fell 1.6 percent, Next dipped 0.5 percent, and Marks & Spencer fell 1 percent.
Midcaps saw their share of M&A speculation, with housebuilder Redrow and up 6.7 percent on talk of a tie-up with a sector peer, possibly Bovis. Builder Crest Nicholson added 6.9 percent.
Electronics distributor Premier Farnell jumped 7.3 percent after it reported a pick-up in quarterly sales and said it had made a good start to its new financial year.
Mid-cap engineering firm Charter rose 6.4 percent after its annual profit rose 152 percent.