The FTSE 100 index of Britain's leading shares ended 0.8 percent higher on Tuesday, as rising base metal prices boosted mining stocks and M&A activity supported the index ahead of a two-day Bank of England meeting on interest rates.
Mining was the standout sector, with the price of copper rising on prospects of stronger demand. Kazakhmys was up 3.6 percent, Vedanta climbed 3.2 percent, Rio Tinto added 3.7 percent, and Xstrata tacked on 3.4 percent.
Merger and acquisition activity also helped other sectors, particularly utilities. News that German power giant E.ON would still play a major role in the consolidation of Europe's electricity industry after making a peace deal with rivals over sought-after power firm Endesa, buoyed UK stocks.
International Power added 2.7 percent, and Scottish & Southern climbed 1.5 percent, both touching record highs, while Centrica rose 1.9 percent and the DJStoxx European utilities index hit a new life-time high.
The FTSE 100 ended 50.6 points, or 0.8 percent higher at 6,366.1, to hit a five week-high but in thin trading volumes ahead of the Easter holiday.
"Bullish copper and nickel prices are supporting the miners, although softer crude prices as tensions appear to be easing between Iran and the UK are doing little to cheer the energy sector," said Jimmy Yates, a trader at CMC Markets.
"Bid speculation is also helping cheer the market in general and the fact that Wall Street has opened the day's trading in a robust mood is also serving to lift trader sentiment."
ICI topped the FTSE 100 leaderboard, surging 7.1 percent to an all-time high in late trade as traders cited talk of a 620 pence bid from Dow Chemical. ICI declined comment.
US crude oil fell nearly $2 after Britain and Iran said they were willing to use diplomacy to end a row over 15 British sailors and marines seized in the Gulf on March 23. BP and Royal Dutch Shell both added about 0.2 percent.
RATES DECISION EYED: Banking stocks had a mixed day, with traders citing jitters ahead of the Bank of England's decision on UK borrowing costs on Thursday, despite most analysts expecting interest rates to be held at 5.25 percent.
HBOS dipped 0.1 percent, HSBA added 0.4 percent, with Lloyds TSB flat.
According to a Reuters poll of 60 economists, there is a strong chance that UK interest rates will rise again this year but probably not until May, when the Bank of England has its latest inflation forecasts.
"The rebound in financial markets in the last four weeks and a string of broadly positive data has probably reinforced the inclination of most Bank of England rate setters to deliver one final rate increase this spring," Bank of America economist Holger Schmieding wrote in a research note. "However, the even pace of economic growth and the lack of genuine wage pressures suggest that the BoE need not be in a hurry.
"Although the risk of an early move this Thursday is serious, we believe the BoE is a bit more likely to wait until May." Royal Bank of Scotland fell 0.4 percent with traders still voicing concerns that it may yet bid for Barclays target, Dutch bank ABN Amro. British energy network operator National Grid added 2.1 percent after Australia's Macquarie Bank agreed to buy its UK broadcast and mobile phone mast business for 2.5 billion pounds ($4.9 billion) in cash.
National Grid, which had been looking to demerge the unit to focus on its core gas and electricity transmission operations, said on Tuesday it planned to return 1.8 billion pounds of the proceeds to investors by buying back shares.
Britain's second-biggest water company, Severn Trent also featured among the gainers, up 1.2 percent after it said it was axing 600 jobs over the next five years to cut costs and that trading in the past year had been in line with its expectations. Britain's biggest brewer Scottish & Newcastle climbed 2.7 percent amid talk of bid interest from Diageo, the world's largest alcoholic drinks company, traders said.
Scottish & Newcastle has recently been at the centre of bid speculation, with its shares having surged as much as 15 percent last Thursday as traders cited a possible bid from Dutch rival Heineken. Diageo declined to comment. UBS also raised the company's price target to 600 pence from 570 pence.