Britain's FTSE 100 index closed sharply higher on Friday as fresh bid talk buoyed mortgage bank Alliance & Leicester, while the Midcap 250 index hit a fresh high led by brewer Greene King.
Shares in A&L, Britain's seventh biggest listed bank, closed 7 percent higher on speculation that Spain's Santander was ready to bid 6.5 billion pounds, building up its UK presence following its 2004 acquisition of Abbey National.
A&L and Santander declined to comment on the unsourced report in the City AM financial newspaper, but a source familiar with the situation said there was no truth in it.
Lawrence Peterman, Investment Director at brokerage Eden, said the UK market was holding its firm tone in the wake of a higher opening on Wall Street, where the Dow Jones industrial average hit a fresh 6-year high on the view that weak April U.S. jobs data could give the Federal Reserve scope to pause in its monetary tightening after this month.
The U.S. is looking alright and the Alliance & Leicester story has helped. The market feels good right now but we do need a bid to come through. It's had a good run, he said.
The FTSE 100 closed up 54.8 points on the day and 69 points higher on the week at 6,091.7, rallying out of a midweek hole caused by concern over U.S. inflation and bolstered by fresh gains in the miners.
Looking at next week, earnings are pretty thin on the ground so the corporate direction will be light. It's all about interest rates. We think the Fed will push up rates (at a meeting on Wednesday) but we'll be looking out for an accompanying statement, said a trader.
The Midcap 250 index outperformed the main index, closing up 1.5 percent or 151.3 points at a record 10,107.9, led by Greene King , which soared 9.9 percent after Merrill Lynch raised its rating on the stock to buy.
Analysts say the midcap index's outperformance is down to its more broadly based makeup than the FTSE 100, which is dominated by oil, mining and bank stocks, and where currency considerations have been a drag.
Some of the heavyweights in the FTSE 100 have large dollar exposure and with the dollar's weakness in recent years, they have been less favourable with investors, said Angus Campbell, market strategist at spread betters Finspreads.
Computer services firm Computacenter advanced 7.4 percent after it said it had a satisfactory first quarter and was pressing ahead with plans to return 75 million pounds to shareholders.
But healthcare software developer iSoft dived 9.4 percent as dealers reported ABN AMRO cut the stock to sell after last week's profit warning. Traders reported fresh concerns about the company's financial position, even though the firm has said such speculation was unfounded.
ABN have downgraded. It's ahead of the weekend, people are worried about what might come out in the press, said a trader.
Blue chips were again boosted by the miners, riding high after copper hit another record, adding to Thursday's 8 percent gain. The red metal has risen 77 percent since the start of this year, and is 350 percent up on its price three years ago as demand has soared from burgeoning developing markets, particularly China.
Pure copper play Antofagasta rose 3.6 percent, Xstrata added 4.9 percent and Anglo American gained 3.2 percent.
Bid talk also boosted shares in Cable & Wireless, which rose 1.2 percent after the Independent newspaper said Telefonica-owned O2 could be considering a move for C&W's internet service provider, Bulldog.
Heavily weighted mobile phone giant Vodafone gained 2 percent, boosting the FTSE 100 by 6 points, on revived talk that it might sell its 45 percent stake in Verizon Wireless.
Vodafone shares were active early last month on talk Verizon Communications would soon offer up to $50 billion to buy out its British partner's stake in Verizon Wireless.
Investor group 3i gained 4.8 percent after Dresdner Kleinwort Wasserstein and Merrill Lynch published upbeat notes on the company before its annual results next week.
On the downside, Intercontinental Hotels, which rose on Thursday on talk private equity group Permira could make a bid for the firm, slipped 1.5 percent as that bid story lost its lustre.
(Additional reporting by Matt Falloon)