Britain's top share index closed up 0.7 percent on Friday, with a $22 billion bid battle for pharmacy group Alliance Boots, further possible merger activity in the European banking sector and stronger US stocks all lending support.
The FTSE 100 closed up 46.2 points at 6,486.8, ending a three-day losing streak to give a weekly gain of 0.38 percent. But the UK benchmark underperformed other major European markets, which were helped by talk of UniCredit's possible bid for France's Societe Generale, dealers said. SocGen later denied it was in merger talks with UniCredit.
US stocks also rose with the Dow Jones industrial average up 0.7 percent at 12,908 points. Alliance Boots soared 7.2 percent to top the FTSE 100 gainers after buyout group Terra Firma, working with medical charity Wellcome Trust and banking group HBOS, made an indicative proposal to the company worth 10.8 billion pounds, topping a rival, agreed deal.
Earlier, Britain's biggest pharmacy chain had agreed to deal of 1,090 pence a share with private equity firm Kohlberg Kravis Roberts & Co and billionaire Stefano Pessina. "The pendulum has swung back from interest rate worries towards M&A activity. Alliance Boots has been a big feature in the UK market," said Keith Bowman, an analyst at Hargreaves Lansdown.
"Yahoo beat expectations and a number of US companies were on the right side of expectations. That has obviously spurred the Dow, and certainly it is helping the UK market." Banking shares were in demand, with Barclays in exclusive merger talks with Dutch bank ABN Amro and the speculation surrounding UniCredit and SocGen adding fuel, dealers said.
Barclays advanced 1.6 percent, while Royal Bank of Scotland , part of a consortium contemplating a rival bid, gained 0.7 percent. Emerging market-focused Standard Chartered was the second best performer, up 4 percent. Traders said talk of a possible bid for the bank at 2,000 pence a share from Citigroup also helped the stock. StanChart declined to comment.
MINERS, PHARMAS UP: Miners rebounded after recent weakness, with the sector contributing nearly 20 percent to the index upside and accounting for five of the top 10 gainers, as metal prices regained some lustre.
BHP Billiton rose 1.5 percent, Xstrata climbed 2.9 percent, Vedanta Resources advanced 2.7 percent and Anglo American put on 1.8 percent. Pharmaceuticals also featured on the upside throughout Europe, as strong results from US drugmakers Merck & Co, Schering-Plough and Wyeth buoyed investors ahead of European numbers due next week.
AstraZeneca climbed 1.2 percent, GlaxoSmithKline added 0.5 percent and Shire put on 1.3 percent. Among individual movers, Vodafone advanced 2 percent to touch a near one-month high after traders cited talk of that mobile phone giant would sell its 45 percent stake in US mobile company Verizon Wireless.
But a Vodafone spokesman denied it would sell its holding, adding that the company was "very happy" with the stake and the situation had not changed. InterContinental Hotels slipped 2.5 percent to top the losers' list after Marriott International lowered its outlook for full-year room revenue, traders said.