UK stocks closed higher on Wednesday as a fresh wave of merger and acquisitions activity boosted media stocks such as Reed Elsevier and heavyweight oil stocks lent support, spurred by rising oil prices.
Reed added 3.1 percent and ITV rose 2.2 percent after music group EMI rejected a bid from Warner Music. EMI shares soared as much as 11 percent during the session.
But analysts said many investors were awaiting an interest rate decision and statement from the US Federal Reserve due on Thursday, with the Fed expected to raise borrowing costs in the world's largest economy by 25 basis points to 5.25 percent.
"With the Fed, it is not so much what they do but in what they say," said Jim Wood-Smith, head of research at Christows Stockbrokers.
The FTSE closed 26.3 points, or 0.5 percent, higher at 5,678.6 points, still struggling to push back towards five-year highs hit in April above 6,100 points. The market fell as much as 11 percent from those highs in a May-June sell-off.
"Everyone is terribly nervous but there is some great value around," Wood-Smith said, pointing to increased bid speculation as a sign of a growing number of cheap stocks.
"Falling equities have made people see better value than there was. Corporates are quite clearly seeing decent value around."
Bid talk continued to spread through the market with Corus up as much as 6 percent to 455 pence during trading hours as traders reported speculation a consortium led by Russia's Severstal was considering an offer for the firm at 520 pence a share.
Corus declined to comment on speculation of a bid from an unidentified suitor. Its shares closed 1.3 percent higher.
"Obviously with the fact that Mittal and Arcelor have decided to get together, the feeling was that Severstal and others now are going to start looking at consolidation," one trader said.
Elsewhere, software maker Sage rose 2.6 percent as investment bank Goldman Sachs took the stock off its "sell" lists, and drinks can maker Rexam gained 2.7 percent as Merrill Lynch raised it to "buy".
Oil stocks such as BP contributed about 13 points to FTSE upside after crude oil prices rose above $72 a barrel and Merrill Lynch raised its oil price forecasts for the next three years and reiterated "buy" recommendations on BG Group and BP.
"The refinery upgrading bottleneck is likely to worsen and demand is likely to remain robust," Merrill said in a research note.
Shares in mid-cap music label EMI, whose artists include Coldplay and Robbie Williams, closed 8.4 percent higher after it rebuffed an approach worth 2.5 billion pounds from smaller US rival Warner Music, saying the bid was "wholly unacceptable".
On the downside, stocks trading ex-dividend took some shine away from the UK market, including United Utilities, down 3.3 percent, and Severn Trent, off 3.2 percent.
Among smaller movers, engineering firm Morgan Crucible added 7.6 percent as it forecast that first-half operating profit before restructuring costs would be ahead of expectations.
But recruitment firm Hays lost 8.9 percent despite saying its annual results were likely to be at the top end of expectations. The shares were hit by fears of higher unemployment in Britain.
Equipment hire firm Ashtead fell 12.8 percent despite posting a tripling in annual profit. Dealers said investors were taking profits from a strong run which has seen Ashtead outperform other support services companies by 60 percent in the last year.