The market was hit by a wave of bid speculation, with both Smith & Nephew and Cairn Energy at the receiving end of the rumours, helping lift the FTSE 100 up 54.7 points at 6514.
Smith & Nephew, the medical devices company, rose more than 5% earlier in the afternoon amidst rumours of a takeover bid that would value the firm at £7.7bn. But it later fell back down a little, and closed up a mere 16p, or 2.6%, at 625p.
Later in the afternoon, however, it was Cairn Energy's turn to jump up high. The FTSE 250 oil and gas company leapt as much as 11% on talk of takeover interest from BP, but shares later subsided, ending up 158p, or 7.5%, at £22.69.
On a more constant level, the big miners were up as metal prices remained steady. Vedanta Resources rose 96p to £21.50, and Antofagasta increased 37.5p to 818p.
Most of the retailers also rose on the back of Debenhams' results. The FTSE 250 company posted an 11.5% rise in full year profit before tax and exceptional items to £131.4m. Shares rose 0.25p to 103.75p, and the news lifted Home Retail Group, which was up 7p at 387p, also buoyed by high expectations for its first half results tomorrow. Next rose 56p to £20.55, and Marks & Spencer increased 3.5p to 615.5p.
The banking sector was also on the rise after a day of gloom yesterday following a series of reports arguing that the extent of the credit crunch was more far reaching than many experts had predicted. But reassuring comments made by Bradford & Bingley, which said it remained comfortable with funding and liquidity levels, helped to lift the sector today. B&B itself rose 24.5p to 278.5p, Northern Rock was up 4.4p at 189.8p, and Barclays took on 8.5p to 588.5p.
Persimmon was also a winner after it announced it would implement a share buyback programme, sending its shares up 39.5p to 988.5p. The company said the recent weakness in share prices of companies within the housebuilding sector had provided an "attractive opportunity" for the firm to buy its own shares. Chairman John White said: "We intend to be flexible and opportunistic on the buyback for the rest of this year."
Meanwhile, BP rose 7p to 612p despite posting a 45% drop in third quarter replacement cost profit to $3.9bn. But underlying profits came in at the top end of analyst expectations, and investors were positive about the general outlook. As analysts at Citigroup said, "on a scale of 1 to 'dreadful'... Not bad."
Further down on the FTSE 250, Inchcape, the car retailer, increased 29.5p to 476.75p on a good third quarter trading update. The group said sales for the three months to end September were up 20.2%, and like-for-like sales rose 3.3% on a constant currency basis.
On the downside, though, Autonomy, the software company, dropped 40p to 915p as it posted third quarter results in line with expectations, but with a drop in gross profit margin. The company said pre-tax profit for the three months to end September were up 57% to $24.9m, but margins fell to 85% from 91% at the same time last year.
But analysts at Numis Securities said: "Q4 guidance remains unchanged, and we believe that the absence of upgrades could create some weakness. That said, we believe the fundamental story and growth potential is sufficiently powerful that any weakness could be a buying opportunity."
Further down, Umbro rose 25.2p to 190.25p after it emerged that Nike had agreed to buy the sportswear retailer for 193.06p a share in cash, valuing the company at just over £280m.
But Flying Brands did not fare so well. The home shopping group, which provides flowers, cards and gardening tools by mail, issued a profit warning for the year. It blamed the Royal Mail strike, which it said had a "material negative impact" on demand for its products. It also said the bad weather in August had affected gardening activity in the UK, and had therefore depressed customers' response to the autumn marketing campaign of its gardening unit.
The company warned its Flying Flowers Christmas campaign, on which the second half performance was reliant, could be "seriously affected" if the postal service continued to be unreliable in the coming months. Shares in the group subsequently fell 36.5p, or 16%, to 192p.
And on Aim, Anglo Asian Mining announced it had sold its CIL gold processing plant to Eureka Mining, a subsidiary of Celtic Resources, for a net $7m. Shares in the group, which has eight copper and gold development properties in three separate mining areas of Azerbaijan, including the Gedabek gold project, rose 0.25p, or 1.9%, to 13.5p. Simon Toyne of Numis Securities said: "This is a significant step forward - combined with the $5m unsecured facility from the International Bank of Azerbaijan, Anglo Asian has approaching half of the funding it will require to build the Gedabek project, whose economics look increasingly favourable given current sentiment in the gold market."