Shire was the top gainer in a rebounding FTSE 100 today after UBS said AstraZeneca could bid for Shire at a 40 per cent premium and still create value.

Astra could pay up to £14.25 cash for Shire and raise $17 billion extra cash to do the deal, said UBS, although the purchase would highlight that many of AstraZeneca's problems are related to holding its margins long term. Its patents on blockbuster drugs Seroquel and Nexium are due to expire in March and April and UBS has a short-term sell rating on AstraZeneca and a £14 price target and buy on Shire.

Shire soared 7 per cent to £10.67 while AstraZeneca was up 10p at £17.58.

The FTSE 100 was up 99.6 at 4415 by 11am as Wall Street rallied by the close and Asian markets also recovered.

Miners were the only fallers in the blue chips with Kazakhmys down 3.9 per cent at £15.63 as doubts over a bid from ENRC continued to surface and worries about a US recession spreading to Asia also weighed.

Xstrata was down 1.4 per cent at £36.67. Anglo American and Lonmin fell on renewed fears over energy supplies in South Africa as the national utility there warned of fresh problems. Only Rio Tinto managed to buck the trend, up 64p at £51.25 after Chinese Aluminium producer Chinalco said it was considering increasing its 12 per cent stake in Rio.

Banks were bouncing back, although nowhere near recovering their losses of yesterday. HBOS was up 2.8 per cent at 473.5p compared with its 10 per cent fall yesterday.

HSBC, which as a globally diversified bank was less affected by the sell-off yesterday, gained 4.6 per cent to 780p.

In the FTSE 250, Misys was the top gainer, up 20 per cent to 170p after it said it was buying a controlling 54 per cent stake in Allscripts, the Nasdaq-listed healthcare software business, for $300 million and merging its US healthcare software arm into the business. The deal was orchestrated by Misys's largest shareholder ValueAct Capital, which is underwriting a new issue of 48.2 million Misys shares at 175p to finance the deal.

Investors had been worried about the future of the US healthcare business which was beset with competition.

Johnston Press, owner of the Yorkshire Post and The Scotsman, continued to fall, off another 4.7 per cent to a new low of 118p on fears it would breach covenants. The comments of chief executive Tim Bowdler, reported in The Times this morning, gave no reassurance, saying he could make no promises.

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