Shares in steelmaker Corus have risen to seven-year highs amid reports that India's Tata Steel could substantially raise its bid for the firm.
Corus shareholders are awaiting the bidders' next moves
Tata and Brazilian firm CSN both want to buy Corus and the ensuing bid battle has pushed up the firm's shares.
They rose a further 2.4% on Friday after an Indian newspaper reported that Tata could potentially raise its offer to as much as 600 pence a share.
But the stock slipped back after Tata dismissed the reports as "baseless".
By late afternoon, Corus shares were up 1.3% at 544.5p on the London market.
Companhia Siderurgica Nacional has offered 515p per share for Corus, trumping Tata's earlier 500p bid for the steelmaker.
CSN's bid values Corus at £4.9bn.
Market regulators have set a deadline of 30 January for the two firms to table further offers.
According to the Economic Times of India, Tata could initially up its offer to 530p per share and may be prepared to go as far as 600p if needed to secure the deal.
But a Tata Steel spokesman said the reports were untrue: "We would like to deny any such development," he said.
Corus directors recommended CSN's bid last month, having earlier backed Tata's lower offer.
Whoever wins the bid battle, a merger of the firms involved will create the world's fifth largest steelmaker.
Analysts said expectations of higher bids to come were clearly behind the shares' momentum.
"Where we are now is a very high level," said Michael Tappeiner, an analyst with West LB.
"But they are very cash rich companies and anything can happen in a bid battle."
In a further illustration of the strength of the steel sector, Germany's ThyssenKrupp reported a surge in first quarter profits on the back of strong demand for stainless steel.
Profits more than doubled to 1bn euros (£656m), well ahead of market expectations.