The final scores showed the FTSE 100 up 14.5 to 5531.7, just 1 point below its intra-day and four-year high. The advance came even as stocks trading without dividend rights, including Vodafone, HSBC, Next and Sainsbury, pegged the blue-chip benchmark back by almost 10 points.
Wall Street provided the main support for world equity markets, with stocks rallying amid hopes that United States interest rates may soon come to an end. The Dow Jones Industrial Average was ahead 39 to 10,910, extending last session's 51-point gain as minutes from the Federal Reserve’s latest meeting showed policy-makers were beginning to discuss how to prepare for the eventual end of a tightening cycle.
On this side of the Atlantic, minutes from the Bank of England’s November meeting showed the Monetary Policy Committee voted nine-nil to keep rates unchanged at its November. A change was not even discussed.
For more on the interest-rate minutes, click here.
BT was among London's brightest features, adding 4.25p to 213.75p after Lehman Brothers raised its rating to "overweight" from "underweight" in a review of the European telecoms sector.
The Wall Street broker moved its overall stance on the industry to "neutral" from "postive" because it forecasts lower mobile-phone earnings and higher capital expenditure requirements. But it said BT is well defended against both these risks.
BT's "100 per cent fixed exposure, limited risk to capex forecasts and attractive dividend yield to help the stock outperform in a difficult sector," Lehman told clients. It set a share-price target of 215p.
Track BT shares here.
Kingfisher rose ahead of its third-quarter sales report due this time next week. B&Q, its DIY chain, has been hit by a series of profit downgrades this year, in common with the rest of the sector. However, while the DIY industry remains in the doldrums, hopes are growing that Kingsfisher's sales growth could surprise after competitors such as Travis Perkins warned about losing business to B&Q's discount weekends, which ran for much of autumn.
Moreover, Kingfisher's operations in France are said to be seeing some improvement following store refurbishments, while strong growth is expected in Poland, Russia and China.
"The market is expecting downgrades that may never come or may, in the worst case, be offset by positive surprises on the international side of the story," said Merrill Lynch, which kept "buy" advice. "We believe the market may now be undervaluing Kingfisher’s earnings recovery potential."
Kingfisher took on 2.75p to 223.25p. US fund manager The Capital Group, Kingfisher's biggest shareholder, was today revealed to have picked up 4.3 million of the shares last week, increasing its total stake to just under 263 million, or 11.2 per cent of the total.
Track Kingfisher shares here.
Peer MFI jumped 4.25p to 73.5p after Citigroup analysts stuck their necks out and redicted that Howden, the firm's wholesale business to the joinery trade, is not doing as badly as some feared.
Shares in MFI have tumbled more than 30 per cent since after the furniture store's October profit warning, partly in reaction to the news of poor trading at Travis Perkins. That sparked concern Howden was going the same way.
There has also been persistent talk that MFI will consider a rights issue at about 50p to fund the restructuring of its retail side. Many traders have therefore been taking out short positions on the stock, with lends apparently accounting for about a fifth of the shares available. Some of those short positions were bought back today as Citigroup's upgrade triggered a bear squeeze.
"MFI would surely have had to make a statement to the market if the rumours were true," Citgroup told clients. "We continue to believe that a further deterioration last seen at UK retail, raises the risk that performance at Howden could ultimately suffer a pronounced deterioration as well. However, following a sharp correction in the shares in the last seven weeks we believe this may be sufficiently reflected in the price."
For detailed information on MFI, click here.
Back on the top line, AstraZeneca gained 62p at £26.60 after it announced the first Phase II/III trials of AZD 2171, a cancer drug. While the meat of the announcement was entirely as expected, there was some relief that Astra, by testing on lung cancer, will be taking a similar low-risk strategy to the one used in the successful trial of peer treatment Avastin earlier this year.
"In so far as Astra shares are the lowest valued in the large cap European pharma sector, trading at 21 per cent discount to the sector on 2006 and 2007 estimates, any progress being reported is likely to trigger a positive reaction," said WestLB. "We believe the various risks related to generics are already well reflected in the share price, with significant upside potential likely to be realised from the pipeline's advancement, so the current low valuation continues to be a very attractive entry point."
For more on AstraZeneca, click here.
DSG International, Britain’s biggest electrical retailer, climbed 1.5p to 152p. The firm reported first-half sales in line with the previous trend and John Clare, chief executive, said he was confident the group will "perform well relative to our competitors" over Christmas.
"There has been no further significant deterioration in our overall trading in the UK during the period, but equally, no clear indication yet of any recovery in our markets," Mr Clare said.
DSG, formerly known as Dixons, said total sales for the 28 weeks to mid-November were up 4 per cent while like-for-like sales were down 3 per cent. Electricals sales were resilient, up 1 per cent, while computing revenue slumped 12 per cent.
"This performance is enough to keep full-year forecasts unchanged, although the first half accounts for less than 30 per cent of group profit. "Confidence in maintaining the dividend is therefore higher," said analysts at Investec, who put their "reduce" rating under review.
For a full report on DSG's statement, click here.
Johnson Matthey was lower by 19p to £12.70 after it posted a 20 per cent increase in first-half profit and said its outlook for the second half was for increased sales growth.
The platinum distributor, which uses the metal for drugs, ceramics and catalytic converters, said profit before tax was £106.4 million. That was in the middle of expectations.
Credit Suisse First Boston cut its rating on Matthey to "neutral" from "outperform" in reaction to the results. The Swiss broker told clients that, while the numbers were fine compared to its own and consensus forecasts, there was no scope for estimate upgrades. That meant the shares were now fully valued, CSFB said.
Read Matthey's statement here.
Back among the risers, Tesco climbed 2.5p to 312.75p after management distanced itself from taking a 49 per cent stake in Meijer, a privately owned American supermarket. There had been speculation that Tesco would announce a US deal after its third-quarter trading statement due Friday.
"'Never say never' is the message coming out of Cheshunt today, but we do view (a US acquisition) as highly improbable and a clear break with the traditional organic growth path supplemented by small acquisitions so consistently followed by management," commented BNP Paribas. It was keeping an "outperform" rating on Tesco shares in advance of the statement.
For detailed information on Tesco, click here.
Amec had a rollercoaster session, trading as high as 382.75p before reversing to close down 8.5p at 357p. The shares, which turned ex-dividend today, have been lifted by reports that Spanish engineering peer Acciona was putting together a cash and paper bid worth £1.2 billion. Oh no we're not, said Acciona.
Track Amec shares here.
Still, the bid gossip could not be quelled among the mid-cap stocks. EMI led, up 22p to 242p on vague talk of interest in the music publisher from either Warner Music or a venture capital group.
While the Warner rumour is an old faithful, talk of a buyout fund at least had the advantage of novelty. It was somewhat lacking a little in detail, however: prices of anything between 250p and 300p were being suggested, but nobody could provide the name of a potential bidder or even a reason why private equity would be interested.)
For detailed information on EMI shares, click here.
SkyePharma took on 2.5p to 56p. According to dealers, a story was doing the rounds that the company could be a takeover target for Novartis. The drug delivery developer said earlier this month that it may put itself up for sale after receiving a surprise approach from a bidder it did not name.
For more on SkyePharma, click here.
It was a similar story at WH Smith, up 12.25p to 409.75p. The retailer -- thought to be heading into Christmas in a better position than most in the sector -- has lately been rumoured to have caught the attention of a US vulture fund. There were also somewhat spivvy takeover stories swirling around Cookson, up 15.25p to 380.25p.
(Bid speculation has lately been shifting away from the blue-chips and into the mid-ranking stocks, where consolidation may be possible among the housebuilding, retail and media sectors. The mid-cap FTSE 250 index was higher by 60.7 at 8306.5, rising for an eighth straight day and reaching a record high for at least the third.)
Track today's market moves by industry sector here.
On a more fundamental tack: better than expected third-quarter results lifted Tomkins, up 18.25p to 289p. The automotive and construction engineer also said its full-year will be in line with hopes despite difficult market conditions. Tomkins' profit before tax was £72.3 million, down 2 per cent.
Track Tomkins shares here.
Housebuilder Crest Nicholson inched higher by 5p to 416p after saying its trading for the year was in line with its expectations, with forward sales 13 per cent higher than a year ago despite a challenging market.
Crest said it expects housing market conditions next year to be similar to 2005, and that the market remains in good shape because of low unemployment and a property shortage in southern England and the Midlands.
For detailed information on Crest, click here.
Should we be expecting a merry Christmas at Game Group? Shares of the computer games retailer, down 1p to 78p today, have slipped back to levels last seen in May on concern about shortages of Sony's PSP and Microsoft's XBox 360. According to Bridgewell Securities, that may only be half the problem.
Product availability suggest that market estimates for the years ending both 2006 and 2007 are "materially at risk", Peter Smedley, Bridgewell's retail analyst, told clients. But he also believes the market has under-estimated Game's fixed costs.
Game had been expected to benefit from a boom in business thanks to the next generation consoles from Sony and Microsoft. But Bridgewell highlighted that, when the Playstation 2 and Xbox were launched, Game's profits dropped 60 per cent as customers hesitated from making purchases of both the old and the new systems to avoid Betamax syndrome.
If something similar happens this year, as Bridgewell forecasts, the lower sales would combine with an inflexible cost base and send Game's annual profits backwards by 40 per cent to around £12 million. (The market consensus currently calls for £21.5 million.)
Game said in March that it had had an approach, only for talks to collapse three weeks later. Bridgewell commented: "If we are right about the magnitude and severity of the near-term risks to the business, then it would be unlikely in our opinion that any bid would re-surface until 2007."
For detailed information about Game Group, click here.
Also on broker watch:
Spirax-Sarco was rated "overweight" in new coverage at Morgan Stanley, with a price target of £10. The US broker also put an "equal-weight" rating and 500p price target on Scottish Power.
Deutsche Bank cut EasyJet to "hold" from "buy".
And UBS moved Future to "buy" from "neutral".
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