Speculation that Xstrata, the Switzerland based copper miner, would mount a merger with Anglo American helped it shoot to a new high at one stage on heavy volume.

By 11am, Xstrata was up 5 per cent at £33.59, having oscillated around 7 per cent up. Its chief executive yesterday said BHP's bid for Rio had created a new momentum for consolidation in the industry. Rio's chief said today he thought BHP's bid was dead in the water and there is speculation that if the Rio bid fails it may turn its sights to Xstrata.

Wednesday Credit Suisse predicted that Anglo American could bid £40 for Xsrata in a half shares half cash offer, which it said would be less earnings dilutive than Xstrata bidding for Anglo.

Anglo was up 3.5 per cent at £33.50 but Rio was up a mere one per cent on rising copper prices at £56.53.

Hopes of further rate cuts and strong results from midcap builder Berkeley helped drive housebuilders such as Taylor Wimpey and Persimmon up 7.7 per cent at 6.2 per cent respectively. Berkeley stressed that demand in the south east was still strong owing to the shortage of supply.

Their moves helped the FTSE-100 continue its gains, up 74 at 6560.6 at 11.35am.

BSkyB was down 2.7 per cent at 588.5p following the reshuffle of the board, with chief executive James Murdoch moving to become overall chief executive of News Corp in Europe and Asia and finance director Jeremy Darroch replacing him as chief executive.

It has also been hurt by a negative note yesterday from Credit Suisse which said the market was too complacent about the regulatory challenges Sky is facing over media ownership and its stake in ITV.

Diary Crest was the top midcap gainer, up 7.2 per cent at 579p on relief that its settlement with the Office of Fair Trading over price fixing it would pay a reduced fine of just £9.4 million.

Aberdeen Asset Management was up 7 per cent at 175p as investors took a better view of its reults earlier this week following the rate cut.

EMAP was the worst midcap performer, down 7.5 per cent at 763p after it confirmed The Times report that it had shelved its sale of its business to business unit Emap Communications after not receiving the price it wanted.

Begbies Traynor, the insolvency practitioner, dived 36 per cent to 90p after it said a slump in profits in the first half - when credit was readily available before the crunch hit home, may not be made up in the second half and that the full year would be 20 per cent below last year.

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