Britain's FTSE 100 index of leading shares ended up 0.4 percent on Monday, buoyed by cross-sector bid speculation and mining stocks. With base metal prices steady after last week's highs and the dollar rebounding from a 20-month low against the euro, mining stocks featured on the upside.
Xstrata added 2.5 percent to top the FTSE 100 leaderboard, while Lonmin climbed 2.4 percent after bid speculation boosted its share price. Bid speculation also buoyed shares of oil explorer Cairn Energy and supermarket operator J. Sainsbury, both up about 2 percent.
Chocolate maker Cadbury Schweppes Plc featured heavily on the upside throughout the session, climbing 2 percent on increased bid hopes due to the weak US dollar and after Premier Foods agreed to buy RHM. The FTSE 100 index closed up 28.9 points, or 0.5 percent, at 6,050.4, with broker upgrades helping Vodafone tack on 1.9 percent and InterContinental Hotels rise 2.4 percent.
"(Bid talk) is one of the big pillars on which I think the year is probably going to seen out," said Tim Hughes, head of sales trading at IG Index. "Any kind of medium term direction is going to be set by bid talk, which was dubiously absent last week."
"Why the FTSE got hit so hard last week - the positive stories evaporated - so I think if that's going to come back in it will set the tone, and probably needs to," he added.
Among other gainers, shares in pharmaceutical company Astrazeneca rose 0.5 percent on the competitive benefit to its heart drug Crestor after Pfizer halted development of its competing drug torecetrapib. But the news also highlighted problems drug firms face with product pipelines, traders said. Shares in GlaxoSmithKline fell 0.7 percent.
With little on the economic calendar, investors said a trading statement from Tesco on Tuesday and US home sales data due for release on Thursday could offer direction. The Bank of England's Monetary Policy Committee's interest rate decision on Thursday will also be watched by many, although economists expect rates to remain at 5.0 percent following last month's quarter-point hike.
"It hasn't been a completely predictable year but looking further back, they don't like to shake the apple cart before Christmas," IG's Hughes said regarding the pending interest rate decision. "That you will imagine will come and go, so it'll be a shock for anything to change."
December's quarterly review of Britain's FTSE 100 index members is to be announced after the market close on Wednesday, with index compiler FTSE making its decision based on closing share prices from Tuesday. Any changes to the FTSE UK index series will take effect from December 18.
Europe's largest defence firm BAE Systems led the decliners, down 1.6 percent on concerns highlighted in weekend media reports about the stalling of its key Saudi fighters contract. Pay-TV firm BSkyB fell 0.9 percent after BT Group said it was to spend 100 million pounds on its long-expected BT Vision TV service and expected the new offering to attract up to 3 million users and to make profits by 2010.
BT is the second company in Britain after cable group NTL to offer fixed-line, mobile and Internet and TV services and its TV plans will pitch it into competition with NTL and BSkyB, which dominate the pay-TV market. BT shares added 0.7 percent.
British Airways fell 0.6 percent after trade unions met with analysts to update them on the progress of long-running negotiations with the airline over a 2.1 billion pound pension deficit.
"There will always be nervousness about this pension situation until a solution is signed, sealed and delivered," a trader said. Among midcaps, RHM jumped 31 percent after Premier Foods agreed to buy the company for 1.2 billion pounds.