The FTSE 100 ended 7.5 higher at 6,692.3 at the end of an eventful session with more than 1.7 billion shares traded.
It was a gutsy performance by the blue-chips' index, which managed to defeat the negative forces of a weak Wall Street and a depressed banking sector.
The two bearish influences combined to drag the FTSE 100 from its new intraday peak of 6,759.3 reached at lunchtime but were unable to push it into the red. The leading index was saved by rises in some of its senior members as corporate action, real and imagined, and analytical support enticed the buyers.
London's biggest stock, BP Amoco jumped 10p to 637p in hefty volume on whispers that its takeover of US rival Arco could be swiftly approved by the American regulators. Rumours coming from the States suggest that the US anti-trust watchdog could announce an earlier-than-expected approval of the merger between rival oil giants Exxon and Mobil today. The quick decision on the mega-deal should enable an equally rapid examination of the BP deal.
Corus Group, the old British Steel, did its bit for the bulls, up 10p to 128.25p on support from broker Deutsche and rumours of a shake-up of its Dutch operations, confirmed after the close.
The bulls' case was bolstered by a sparkling performance from the in- vogue telecom sectors. COLT Telecom rang up a 108p rise to 2,432p after a deal with web group Affinity Internet, as takeover talk returned. Sector leader BT soared more than 30p during the day as whispers of a large deal did the rounds. However, a late bout of profit-taking wiped out most of the gains and the stock ended just 0.5p higher at 1,313p - on the threshold of its all-time high.
The brewery and leisure sector was all frothy in anticipation of a mega takeover. Bass brewed 23.5p better to 698.5p on talk that Granada, down 7.5p to 532.5p, could launch a strike if it decides that a hostile bid for United News & Media, 30.5p higher to 799.5p, is too expensive.
Alternatively, Granada could go for bargain-basement Whitbread, 8.5p up to 585.5p. Midcapper hotelier Greenalls surged 18p to 298p as a predator was said to be ready to check in.
Real bids also helped the FTSE 100 along. Building materials group Hanson cemented a 34.5p rise to 549.5p after confirming its pounds 1.6bn bid for Australian group Pioneer. Electronic retailer Dixons buzzed 61p higher to 1,341p after buying a Norwegian chain for pounds 444m. Reports of a link up between Dixons' Net wonder Freeserve, up 9.25p to a best-ever 304.25p, and WH Smith, up 37p to 422p, helped.
Defence group British Aerospace dropped 6.5p to 389p ahead of today's analyst meeting where it is expected to unveil its new name - probably BAe Systems - and strategy.
The list of blue-chip losers was a cross-section of the banking sector. Royal Bank of Scotland plunged 87p to 1,241p as the market deemed as too stingy its 1,590p-per-share bid for NatWest, down 74p to 1,444p. The low offer triggered talk that a third predator such as Deutsche Bank or Abbey National, down 4p to 1080p, could enter the fray.
Original bidder Bank of Scotland rose 4.5p to 728.5p on whispers that it could be bought by a rival if its bid fails.
Utility British Energy joined the banks' misery, falling 20.5p to a 12- month low of 349.5p after a downbeat trading statement.
The FTSE 250 was in rampant form, surging 44.5 to set its new intraday high of 6,226.6 and finishing 36.8 higher at 6,218.8 - another closing peak.
Bid rumours centred on fashion retailer Arcadia, up 8p to 96p. After a disastrous profit warning, the shares in the owner of the Burton and Dorothy Perkins chain are on cut-price shelf and a predator such as Archie Norman's Knutsford, down 6.5p to 263.5p, could pounce.
Hi-tech stocks were at the forefront of the advance after highly respected broker DKB highlighted its favourite buys for 2000. They included computer group Admiral, 122.5p better at 1,390p, telecom midcapper Kingston Communications, 46p up to 641.5p, and mobile phone parts maker Filtronic, 86.5p better at a record 1,684p. Fellow techie ARM Holdings hit the pounds 30 mark, soaring 305p to 3,055p. The techMark broke the 3,000 barrier with a 70.37 rise to 3019.47. Engineer AEA Technology was bashed 39p lower to 412.5p after a profit warning.
The Small Cap underperformed its rivals, finishing 2.1 down to 2,870.3 despite several interesting Internet stories.
The insurance broker Culver soared 131.5p to 214p after the purchase of a US travel website sparked whispers of an imminent spin-off of its web holiday business. Other online deals are expected. Cinema operator Pacific Media rose 2.66p to 7.375p after confirming the reverse takeover of an Asian Internet operator. Cash shell Lionheart soared 3.75p to 11.5p on whispers of a Net deal. E-commerce specialist Infobank jumped 117p to 1,325p amid talk that its mystery predator is US rival Ariba.
Minorplanet, the maker of a revolutionary car-tracking systems rose 47.5p to 376.5p on talk that a major deal is imminent.
Back in the real world, rumours of analysts upgrades helped property groups Compco, up 4p to 281.5p, and Countryside Properties, up 4.5p to 133p. Video phone maker Motion Media rose 30p to 390p on rumours of a deal with Orange. Furniture tiddler Cornwell Parker moved 13.5p lower to 60p after terminating merger talks and a warning of poor trading.
SEAQ VOLUME: 1.75bn
SEAQ TRADES: 107.119
GILTS INDEX: 106.31 +0.16
THE MARKET is abuzz with rumours of deals at E-Capital, the old Cambury Investments. The investor in Internet ventures logged on to a 4.25p rise to 15.5p yesterday amid talk of three new investments. E-Capital is rumoured to have taken a stake in a provider of music on the web which could float some time next year. The company has also eyed a French video-conferencing specialist and a third Internet service provider.
THE TV production company Galaxy Media should join the Internet craze today. The shares are coming back from suspension at 39.5p after the company announced the pounds 40.2m acquisition of Gaming Internet, the maker of online games such as Zap Casino.com. The purchase comes after Galaxy's failure to complete the reverse takeover of Sport News Group, a TV company controlled by Galaxy's chief executive, Graham Gutteridge.Reuse content