Whitbread edged up 39p to £15.79 amid hopes that the leisure group will announce soon a deal to boost its fast-growing Premier Travel Inn chain, seen as the jewel in its crown.

The company is said to be poised to agree a deal worth more than £40 million to acquire Golden Tulip UK, a budget hotel company controlled by the private equity firm Graphite Capital, with seven hotels trading and another eight under construction.

Whitbread is expected to convert the properties to the Premier Travel brand as soon as a deal is completed. A sale would crystallise a big profit for Graphite and management, who hold 20 per cent, as the business has estimated debt of just £14 million.

Carphone Warehouse, which will join the FTSE 100 next week, rose 20½p to 370¾p on talk of a bid after Best Buy, its American partner, said that it had acquired a 3 per cent stake for $183 million (£91 million). The electricals retailer has a market value of $21 billion with almost no debt, and has a mobile retail venture with Carphone in the United States.

Mark James, of Collins Stewart, said: “A full bid is plausible. Best Buy has shown an interest in breaking into the UK.” Nevertheless, rumours may be designed to squeeze out short traders, who hold about a third of Carphone’s free float.

The FTSE 100 rallied, closing up 100.5 points at 6,283.3. It was buoyed first by the Government’s guarantee of Northern Rock deposits and then by better-than-expected earnings from Lehman Brothers, one of the investment banks at the heart of credit crunch fears. Alliance & Leicester, which fell 31 per cent on Monday, recovered 32 per cent, or 193p to 793p, on a raft of buy notes from brokers.

Northern Rock bounced only 23¼p to 306p as short sellers closed their positions. There is speculation that banks such as Lloyds TSB or even BBVA, of Spain, may be able to strike a deal to buy it. Institutions were also buying, one trader reported, although JPMorgan said: “Only the bravest and most risk-tolerant would enter a position in the stock.”

Mark Rayden, of the stockbroker Hoodless Brennan, said that more than a third of its private internet trades were in the Rock on Monday, with 76 per cent of them buying.

Barclays rose 26p to 607p, Royal Bank of Scotland jumped 17½p to 526p and HBOS, owner of Halifax, closed up 25½p at 838¼p.

Lonmin, the platinum miner, was the worst FTSE 100 performer, down 119p at £31.70 after Credit Sussie cut this year’s earnings forecasts by 16 per cent, saying that a strike at its Marikana mine would hit its output, and saying that other analysts were likely to follow suit in coming months.

Marks & Spencer fell 4p to 570½p. after Evolution cut its price target to 620p, based on an imminent consumer spending slowdown.

Record high oil prices and a “reduce” note from Numis weighed on easyJet, down 16p at 512p.

New York: A jubilant Wall Street soared after the Fed cut its benchmark interest rate by a larger-than-expected half a percentage point. The Dow Jones industrial average surged 336.00 to close at 13,739.40 – its biggest one-day point jump in nearly five years. Although some investors had hoped for a half-point rate cut, most had bet on a quarter-point cut in the Fed Funds rate.

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