LONDON (AFP) - Blue chip shares closed in positive territory amid ongoing merger and acqisition speculation, and supported by upbeat trading on Wall Street after economic data showed inflation rose less than expected, easing concern the Fed will abruptly raise interest rates.
The FTSE 100 index finished 8.1 points higher at 4,556.5. All the broader FTSE indices showed gains.
Over in the US, the Dow Jones Industrial Average gained 37.90 points to 10,269.80 and the Nasdaq added 12.69 points to 1,909.21.
Lloyds TSB was the most traded stock, with 184 million shares changing hands, followed by Vodafone who saw 175 million shares being exchanged.
In London, vague bid speculation boosted certain blue chips.
Amvescap put in the FTSE 100's best performance on ongoing speculation the group is a takeover target after announcing a cut to its interim dividend Wednesday.
Shares in Amvescap rose 3.81 percent to 320-1/4.
MmO2 also attracted speculative buyers, rising 2-1/4 pence to 94-3/4 as investors mulled a report in Spanish newspaper Gaceta de los Negocios which claimed Telefonica could be considering a bid for the mobile phone group -- although the Spanish firm denied such interest.
The British telecoms group has long been rumoured to be vulnerable to a takeover, with Dutch group KPN previously cited as a potential predator.
Also in merger and acquisition news, HBOS shares continued Wednesday's run -- up another 15-1/2 pence to 753-1/2 -- on its decision to pull out of the race for Abbey National.
Investors cheered interim results from blue chip Kingfisher, sending the shares 3.28 percent higher to 299-1/2, Thursday's second biggest rise.
The DIY retailer's first-half figures beat expectations, leading Merrill Lynch to repeat its 'buy' rating while Dresdner Kleinwort Wasserstein kept its 'add' recommendation, and Investec upgraded its stance to 'buy' from 'hold'.
Hanson shares also saw good demand, jumping 6-1/2 pence higher to 394-1/4 on news US senate minority leader Tom Daschle has proposed a 140 billion dollar asbestos victims' fund in an effort to move congressional negotiations.
And blue chip miner BHP Billiton gained nine at 537-1/2 after Morgan Stanley hiked its target price for the stock to 610 pence from 580, reiterating its 'overweight' stance.
The US broker also recommended investors switch to BHP Billiton or Rio Tinto and away from Antofagasta, as it downgraded the Chilean copper miner's rating to 'underweight' from 'equal-weight'. Antofagasta shares slid 10-1/2 pence at 1,045.
On the downside, shares in Reckitt Benckiser slumped 2.94 percent to 1,422 after a leading investment bank advised clients to sell the shares.
Reckitt was the worst performing share on the FTSE 100 after Goldman Sachs had told hedge fund clients to short the stock, noting the advice has followed a strong run in the share price of Reckitt.
Man Group, the second biggest loser Thursday, dropped 2.04 percent to 1,344 after Merrill Lynch cut its earnings forecasts ahead of upcoming results, to reflect the performance of its key hedge fund strategies, which has been a negative, and the US dollar, which has been a positive.
Nevertheless, Merrill retained its 'buy' stance on Man, arguing that the shares are undervalued and that the firm is a powerful long term growth story.
And Cadbury shares stayed weak after Wednesday's second-half profit warning from its US peer Coca Cola, down five pence to 436.
Second-liner Premier Oil shed 15-1/2 pence at 6597-1/2 as better-than-expected interim results were offset by a weak outlook for the second half.
Merrill Lynch reiterated its 'sell' rating on the stock.
Aggreko closed came off earlier lows, but still shed 2-1/2 pence to 152 after it reported a nine percent drop in first-half profit after the dollar fell, and warning that demand for its air conditioning units had been hit by recent cool weather in Europe and the US.