Britain's FTSE 100 share index closed higher on Tuesday as a surge in the cost of base metals boosted miners such as Xstrata, while steelmaker Corus rose on bid talk and reassuring results from a rival.
But record second-quarter profits for oil major BP failed to inspire investors and a much-anticipated annual general meeting at Vodafone had little impact on its shares after Chief Executive Arun Sarin was reappointed despite some shareholder gripes.
The FTSE 100 gained 17.3 points, or 0.3 percent, to finish at 5,851.2 points - its highest close since July 12.
Some analysts say the market appears to have recovered from May's heavy sell-off and expect the index to push higher.
The market is prepared to make further upward progress, said Edward Menashy, economist and strategist at Charles Stanley. Markets are beginning to decide that interest rates (in the United States and the UK) are nearing a peak.
Menashy noted equities looked good value compared with other asset classes.
Where are the alternatives? There are no alternatives, he said. There is already a massive gap in favour of equities - I would say buy on dips.
The mining sector contributed most to FTSE gains after copper and nickel prices rose on supply fears and solid production numbers from the world's number one miner, BHP Billiton, bolstered sentiment.
Xstrata rose 3.4 percent, pure copper play Antofagasta added 1.6 percent and Rio Tinto gained 1.9 percent.
Anglo-Dutch steelmaker Corus added 3.5 percent to top the leaderboard with dealers citing renewed, but vague, bid speculation and a well-received rise in second quarter profit for peer United States Steel.
Pharmaceutical firm Shire rose 3 percent to 852-1/2p after the U.S. Food and Drug Administration late on Monday approved its treatment for a rare but possibly fatal inherited disease called Hunter syndrome.
The news prompted Morgan Stanley to lift its share price target to 946p from 862p, while traders reported Goldman Sachs also raised its price target on the stock.
British Airways climbed 3 percent after Morgan Stanley upped its rating to equal weight from underweight and said it believed the market will now focus on the operational performance of the airline rather than on medium-term labour and regulatory issues.
But shares in BP closed 0.6 percent lower. Traders said even though the oil major's second quarter profits hit a record $6.1 billion - boosted by record oil prices - the market took the numbers in its stride.
BP was fine, they were a little disappointing on the tax charge but people are looking through that and seeing they made $6 billion of profit in the quarter, said Lawrence Peterman, Investment Director at brokerage Eden.
Mobile phone giant Vodafone finished 0.4 percent higher, adding slightly to gains made on Monday on the back of a solid performance update. The board on Tuesday stood by Arun Sarin despite a shareholder poll in which almost 10 percent of votes were cast against him.
Medical devices maker Smith & Nephew fell 2.1 percent as some investors fretted over Thursday's earnings report. The firm cut its earnings growth forecast for 2006 in April to 4-6 percent from 7-8 percent.
Water utility Kelda slipped 1.5 percent after dealers said Cazenove had cut its rating on the stock to underperform from in-line.
Mid-cap shares were active with chip designer ARM Holdings up 5.7 percent after it announced a 14 percent rise in second quarter revenue, driven by stronger than expected licensing of its chips, and said growth for the year would be in line with expectations.
Shares in Internet casino and poker room 888 slid 6 percent after a 23 percent boost in sales to $80 million during the second quarter undershot expectations.
(Additional reporting by Keiron Henderson and Ana Nicolaci da Costa)