Miners led the way forward today on strong demand for commodities and a smattering of takeover activity.
Analysts at JP Morgan raised their target prices for many of the leading mining groups, after upgrading their forecasts for metals prices.
"The biggest upgrade among the major commodities were nickel (+33% long term) followed by iron ore (18%)," said the bank. It raised its target prices on BHP Billiton, up 25p to £18.68; Antofagasta, ahead 11p to 860.5p; Anglo American, 107p higher at £33.52, and Vedanta Resources, up 74p to £22.30.
Xstrata rose 48p to £35.76 as it made a $2.8bn bid for Australian nickel miner Jubilee Mines. The news gave a lift to Talvivaara, a Finnish nickel and zinc company, which added 17.25p to 297.25p
Thanks mainly to the miners the FTSE 100 closed 44.7 points higher at 6706.0. But the market's rally was far from resilient and volumes were nothing to write home about. There is some caution ahead of this week's US interest rate decision by the Federal Reserve, not to mention concern about the effect of ever increasing oil prices on the global economy.
David Buik of spread betting group Cantor Index said: "The poor volumes tell us that punters don't believe the ebullience. It's all about mining and oil stocks and a few banks rallying to the cause, but there is no conviction in the market maker's stance. Oil is nearly $93 a barrel and gold is $797 an ounce. I hope that equity geeks get their Fed rate cut on Wednesday – God help them if they do not."
The strength in the oil price helped BP climb 5p to 634p and Royal Dutch Shell 12p to £21.40.
Royal Bank of Scotland edged up 4p to 511.5p despite a 51 page note from Citigroup suggesting the bank's involvement in the consortium which bought Dutch rival ABN Amro could destroy around £15bn of value.
"RBS management must prove to shareholders that the acquisition of ABN's wholesale and international retail businesses was in their best interests," said Citi. "Our analysis shows that even with full synergies the deal could still destroy around £15bn value by reducing capital returns (around £5bn) and reversing early signs of a recovery in the stock's rating (around £10bn).
"We expect downward pressure on RBS's rating to reflect the sharp increase in balance sheet leverage post the ABN acquisition. In the current environment we expect excessive leverage to be heavily penalised by the market."
Citi, which was one of the investment banks advising Barclays in its unsuccessful rival bid for ABN, restarted coverage of RBS with a downgrade from buy to sell and a 450p target price.
Housebuilders were hit by a Hometrack survey showing house prices had fallen for the first time in two years. Taylor Wimpey fell 8.5p to 230.5p while Barratt Developments lost 20p to 631p.
Standard Life lost 2.5p to 276p as Resolution dropped its support for a £4.9bn bid from the insurer. Rival Pearl now looks in a winning position to take over Resolution, up 1.5p at 728p.
Supermarket group J Sainsbury was 13p lower at 552.5p after Friday's reports that Delta Two, the Qatari backed fund, was seeking an extra £500m of financing for its proposed 600p a share bid. The Takeover Panel has set a November 8 deadline for Delta Two to put up or shut up.
But Marks & Spencer added 14p to 642p as Legal & General increased its stake by around 1% to 4.14%.
Lower down the market, contamination control group Tristel added 8p to 54.5p after full year profits rose 49%.
Analysts at Daniel Stewart issued a buy note on the company, saying: "Despite recent sluggish share price performance, we suggest that Tristel's fundamentals are not reflected by its current market valuation."
Vyke Communications, the mobile voice-over-internet protocol (VoIP) supplier, jumped 14p to an all-time high of 195p. The company has announced a £12m placing with institutions to help fund its new distribution agreement with Nokia. The deal means customers with Nokia handsets can be directed through to the Vyke website, receive a $1 credit and sign up as Vyke customer enabling them to make cheap international calls over the internet.
But specialist steel group Metalrax slumped 17.75p to 38.25p after it warned 2007 results would be significantly worse than current market expectations.
Mining group Bezant Resources lost as 9.5p to 87p as a number of retail investors decided to cash in. The company's broker Mirabaud Securities has a 146p price target on the business and has made a series of recent presentations to institutions in Scotland and the north of England. Traders believe the company could issue a positive drilling update sometime next month.
Max Petroleum, the Kazakhstan-focused oil and gas explorer, fell 14.25p to 96p after its shares came back from suspension. The company launched an investigation into certain related party transactions, and on Friday announced it had dismissed seven employees for breach of contract. It said there would be no material impact on the group's financial position.
Finally, data centre group Telecity slipped 4p to 277p in its first day of full dealings after conditional trading started last week. The group joined the market at 220p a share.