Bid speculation became the dominant theme in a rising market yesterday with much attention centred on Liberty International, the group behind shopping centres including Lakeside and Covent Garden.

Liberty rose 70p to 945p after news that Simon Property Group, one of the largest public real estate operators in America, had raised its stake in the company to 3.45 per cent.

Simon has been gradually and quietly building its stake in the British retail-focused real estate investment trust (Reit) for the past few months, taking advantage of its weak share price, dragged down by plummeting property valuations. This month Liberty reported a 7.4 per cent fall in the value of its portfolio and gave warning that the property market was unlikely to pick up in the near future.

It is understood that the two groups have a close relationship, but it is thought unlikely that Simon’s stake-building will lead to a bid. The 8 per cent rise in Liberty’s share price also reflected a degree of short squeezing as those who had been bearish on the company covered their positions.

British Land, another commercial property group, also rose, up 44p to 751½p, as shareholders reacted to news that the real estate arm of the Government of Singapore had increased its stake in the group to just over 5 per cent.

In a busy day for the sector, traders also cited talk of a bid for Hammerson, up 45p to 918p, but no names were offered concerning who might be behind a potential approach.

The FTSE 100 ended the week with a flourish, rising more than 2½ per cent, up 135.4 points to 5,505.6. The market was buoyed by gloomy economic data that fuelled hopes of an interest rate cut, with resurgent financial stocks leading the index.

Banks advanced as fears over potential losses at Lehman Brothers turned to hopes of a bid for the US investment bank.

HBOS, hit in recent sessions on concern that loan losses could rise, rose 17p to 289p.

Lloyds TSB, also aided by tentative bid chatter, gained 19½p at 299½p.

Royal Bank of Scotland put on 11¼p to 220¾p and Barclays moved 15¾p higher at 326¾p.

Insurers rose after Benfield, up 74½p to 345½p, agreed to a £844 million takeover from Aon, the US insurance brokerage. Aviva gained 32½p to 509½p and Prudential added 30½p at 537p.

BHP Billiton, the mining group, rose 28p to £16.98 after Australia’s antitrust regulator said its $128 billion bid for Rio Tinto, its rival, up 37p to £51.79, could raise competition issues.

In the second string, Rentokil Initial fell 4½p to 69¼p after the pest control to parcel delivery service conglomerate posted worse than forecast first-half results.

At the end of a mixed day, Bradford & Bingley closed 2p higher at 53½p after the underwriters of its rights issue were forced to take up the bulk of the shares.

SSL International, the Durex condom maker, rose 27p to 465p, after Goldman Sachs added the stock to its “conviction buy” list, citing further scope for consolidation in the sector, and describing it as a “strategic asset”.

- New York: Stocks rallied on speculation that struggling investment bank Lehman Brothers could be taken over and as global oil prices fell sharply. The Dow Jones industrial average closed up 197.90 points at 11,628.10.

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