Cable & Wireless led London's blue-chip risers on hopes that the telecoms group will be broken up, despite a denial from the company that such talk was "premature".

The broader UK market was also positive, despite the US struggling to find direction, with the FTSE 100 up 47.1 at 6465.8 in afternoon trading.

In early deals on Wall Street, the Dow Jones was down 8.60 points at 13,112.30, while the Nasdaq composite index was 7.99 points lower at 2,549.22, on mixed economics news.

The Commerce Department said personal spending increased 0.3 per cent in March, sharply down from 0.7 per cent in February and falling short of expectations of a 0.5 per cent increase.

There was some marginally more dovish data on US inflation, with the core Personal Consumption Expenditure index, which excludes volatile food and energy costs, up 0.3 per cent in March, unchanged on the previous month.

That meant the annual rate of core inflation fell to 2.1 per cent in March, down from 2.4 per in February.

Meanwhile the Chicago Purchasing Managers index fell to 52.9 in April, down from 61.7 in March on a seasonally-adjusted basis.

Back in London, weekend press reports claimed C&W was putting in place plans to demerge its UK and international businesses, potentially selling them to seperate buyers. shares rose more than 5 per cent to peak at 188.6p, with Citigroup analysts saying that such a proposal could happen within two years and would value shares at 345p apiece.

The wider market rallied sharply, with FTSE 100 index recouping losses that followed weaker than expected growth data from the US on Friday.

Next climbed on the back of an upgrade from Morgan Stanley, which upgraded the retailer to "overweight" on hopes that the retailer will improve sales with new store formats and an attempt to become more fashionable.

Renewed takeover hopes lifted Slough Estates. The property developer was linked recently with Economic Zones World, a Dubai business park operator and sister company to DP World, the ports group that bought P&O last year.

Punch Taverns was in demand ahead of interim results tomorrow, where the pubs group could provide an update on its property portfolio. Analysts have recently speculated that Punch could release as much as £1 billion from its managed fleet.

Filtrona led the mid-cap risers after the plastics and fibre products group said it was trading in line with expectations, despite sterling's strength dragging its reported growth.

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