Shares in Scottish & Newcastle surged more than 12 per cent this afternoon following speculation that the brewer could face a bid from Heineken.

S&N, the brewer of Foster’s, Kronenbourg and Baltika beers, added 64p to 595, its biggest one-day gain since October 1988.

The FTSE 100 closed up 57.0 points at 6,324.2, reflecting gains on Wall Street where the Dow Jones was up 49.80 points at 12,350.59, the Nasdaq Composite rose 1.49 points at 2,418.59 and the S&P 500 index took on 5.80 at 1,423.05.

The second-biggest riser was Tate & Lyle which ended the session up more than 5 per cent, adding 29p to 573.5, after earlier rising more than 7 per cent to lead the main index.

Investors were reassured by an upbeat trading statement from the sugar and sweetener group, its first since a profits warning in January.

It said trading was in line with expectations and continued to "comfortably exceed" the same period last year. Tate also revealed that the sale of its European starch business could be wrapped up within a few weeks.

That coincided with renewed speculation that Tate could be a target for private equity if it does not make a major acquisition or give cash back to shareholders.

Earlier in the day, Alliance Boots moved higher on a talk that private equity firms Blackstone and Terra Firma were weighing up possible counter-bids for the retailer. Traders questioned the theory given the involvement of Stefano Pessina, Boots' deputy chairman and 15 per cent shareholder, in KKR's consortium.

Shares in the health and beauty retailer finished 14p or 1.38 per cent higher at 1,027.

Compass group took on 15.75p to close at 335.75 while miners Antofagasta, Anglo American, Lonmin and BHP Billiton rose more than 2 per cent.

Compass, the world's biggest catering company, said that trading in the first five months of the year had been ahead of expectations and the sale of Selecta, its European vending business, was set to be completed by the summer.

Next was the biggest blue-chip faller after Citigroup said the numbers on a leveraged buyout of the retailer did not make sense on a five-year view. Next shares have surged by more than 15 per cent since reporting annual profits last week amid talk of interest from buyout funds.

But this afternoon they were down 112p, or 4.8 per cent at 2241.

Another casualty was Kingfisher, which closed down 0.5p at 270.5 after it reported falling profits and challenging trading conditions for its biggest businesses. Europe's biggest home improvement retailer said underlying profits fell 11 per cent to £396.6 million.

DSG International also lagged the trend after warning that it had experienced a potential £10 million fraud at a warehouse in Paris.

The electricals retailer said that several staff and "external individuals" had been arrested by the French police and described the incident as isolated.

It said in the statement: "The Group currently anticipates that the financial impact of these issues will offset the expected profit contribution of the New Businesses Division to the Group in the current financial year only."

A company insider said: "The bottom line in this is that stock was going missing from the warehouse."

Among the minnows, Jessops bounced after yesterday issuing its third profit warning of the year as Panmure Gordon analysts recommended their risk-tolerant clients to buy on hopes that a private equity fund would appear to try and salvage something from the wreckage.

Markets in Asia rose earlier but concerns about the US economy remained after Ben Bernanke, the Chairman of the US Federal Reserve, said that core inflation was "uncomfortably high" and described the outlook for the US housing market as "uncertain." In Tokyo the Nikkei 225 index closed up 9.21 points, or 0.05 per cent, at 17,263.94, although it fell as low as 17,036.22 in morning trade after Mr Bernanke's comments.

Hong Kong's Hang Seng Index ended the morning up 210.03 points at 19,763.90 and markets in Australia, South Korea, Singapore and Taiwan also made modest gains.

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