Another bout of merger mania - both real and reported - and a buoyant start on Wall Street perked up the market today.
Banks moved higher on consolidation hopes after Barclays was said to have made an approach to Dutch bank ABN Amro, which is currently fending off calls from activist investors for a break-up. ABN shares surged 7% although Barclays - which said it would clarify its intentions by the start of business tomorrow - slipped 5.5p to 677p.
Traders said Barclays would not have the field to itself, since ING and Banco Santander - owner of Abbey in the UK - were unlikely to sit by and let Barclays march onto their territory. If Barclays failed, it could leave itself open to a bid, either from US giants like Bank of America or Citigroup - which ran the rule over the UK bank a couple of years ago - or from whoever snaps up ABN.
Other banks rose on hopes of sector consolidation. Lloyds TSB added 14p to 548p, additionally buoyed by speculation it could sell its share registration and stock management business for up to £600m.
Standard Chartered benefited from the upbeat mood, up 33p to £14.28, while other financials were also stronger. Prudential added 26.5p to 708p on suggestions shareholders could put pressure on the company to break up its business. Traders believe the Pru is a prime candidate to be among the next FTSE 100 bid targets. Insurance group Royal & Sun Alliance rose 5p to 165p on renewed talk of a possible bid from Finland's Sampo, while Friends Provident finished 8p better at 202p.
Among the leisure companies, First Choice Holidays climbed 24p to 308p as it agreed to merge with the Thomson travel business owned by Germany's TUI, just a few weeks after rival MyTravel linked up with Thomas Cook.
There were also some positive company results to add to the upbeat mood, notably from building materials group Wolseley. It jumped 44p to £12.43 after it reported a smaller than expected 8.3% fall in half-year profits and said US non-residential business was holding steady although the US housing market remained tough.
Record profits from electronics group Laird also pleased, along with the sale of its home security division to Greg Hutchings' Lupus Capital for £242.5m. Laird added 50.25p to 513p while Lupus remained suspended at 19.75p.
On the speculative front, Alliance Boots added 12p to £10.16p on talk that private equity giant Kohlberg Kravis Roberts may be preparing to raise its £10 a share offer for the business.
But Daily Mail & General Trust marked its first day back in the FTSE 100 with a 9p fall to 814p. This coincided with the sale of 60,000 shares at 800p each on March 15 by director Paul Dacre.
Back on the takeover front, cigarette maker Imperial Tobacco fell 45p to £22.85. The company may have to increase its €45 a share offer for Franco-Spanish rival Altadis after its first attempt was rejected, or even go hostile, traders believe.
Anglo-Dutch consumer giant Unilever slipped 18p to £15.07 after last week's bid-fuelled surge, even though dealers believe a carve-up of the business a la Cadbury Schweppes would make sense.
AstraZeneca, the pharmaceuticals group, fell 20p to £28.61 after heart drug AGI-1067 - a joint venture with US group AtheroGenics - failed to meet its main target in a late-stage clinical trial.
And supermarkets group Wm Morrison lost 3.75p to 314.75p in the wake of a downgrade from Credit Suisse. But rival J Sainsbury added 1p to 557p as Seymour Pierce changed its recommendation from sell to hold.
"We are hearing there are now three parties looking seriously at Sainsbury," said Seymour's Richard Ratner. These are the two venture capital group's and a "mystery third party". Mr Ratner said the pensions deficit could still be a problem for any bidder. "If the trustees demand more than £300m to £400m, which would fill the deficit ... then this could kill the deal," he said. But he now believes an offer "is more likely to be forthcoming than we had previously [thought]".
Despite the fallers - and an increase in Chinese interest rates - the FTSE 100 closed 58.8 points higher at 6189.4, helped by a rise of around 100 points on Wall Street by the end of London trading. The FTSE 250 of mid-cap shares was 169.5 points better at 11,438.7.
Miners were wanted as nickel hit yet another new high, which helped Xtrata gain 68p to £24.89 and BHP Billiton 20p to £10.70. Restaurants and pubs group Whitbread added 45p to £17.41 after Citigroup issued a buy note with a £20.26p target.
Elsewhere, the pain for shareholders in music and book retailer HMV continued. Its shares fell another 5.5p to 117.75p after Goldman Sachs downgraded its recommendation to sell with a 12-month price target of 100p.
Burren Energy lost 7p to 743p after lower than expected profits. The company has however agreed to split a stake in a Congolese oil field with Italy's ENI. The deal ends uncertainty about whether Burren would try and pre-empt ENI's original agreement to buy the field from France's Maurel et Prom.
But investors in Abbot Group were celebrating. The oil rig builder and operator climbed 13p to 293p after it reported a 20.6% increase in full-year profits and expressed confidence about the outlook.
Lower down the market there was also some bid excitement. Soft drinks maker Nichols, which makes Vimto and Sunkist, fizzed up 21p to 304.5p after confirming it was in talks about a possible offer for the company.