A flurry of domestic and international takeovers and mergers pushed the FTSE up 116.9 points to 5834.4 - one point less than its earlier high.

Firmer futures and stronger overseas markets also added to the momentum.

The broader indices also performed well.

On the domestic front, the merger of BTR Siebe engineering giants grabbed the most attention, although analysts said that in reality Siebe had been the buyer.

"The market perception is that Siebe usually makes a success of its acquisitions" said Teather & Greenwood salesman Peter Caulkett.

The two companies have agreed a deal which will create the world's largest controls and automation group, valued initially at £7.6bn.

By mid-session, BTR shares gained 32p to 127p while Siebe shares jumped 21p to 236p.

Guardian Royal Exchange, which rose by 10.4% at the beginning of the session, rose 14% as shares soared 42p to reach 350p after confirming that it is considering possible offers, which analysts said could fetch more than £3bn.

The company, valued at £2.71bn, has been linked with Axa-UAP and AGF of France, Germany's Allianz and US company AIG.

EMI dropped 4.3% on profit-taking after confirming it has held informal talks with German media group Bertelsmann recently rather than discussions with News Corporation as market rumours had alleged last Friday.

Natwest was one of the best performers with a 6.2% gain and the most actively traded stock in volume of more than 51m shares.

Barclays shares rose by 4.2%. The bank denied a newspaper report that it was planning a demerger of its retail and corporate banking services, but investors' enthusiasm was barely dented.