Rumours of mergers and more speculation that Lloyds Banking Group plans to cut 1 billion from its cost base helped the Footsie to modest gains yesterday.
The FTSE 100 Index was up 7.66 points at 5,773.46 after a rally in banking shares helped counter ongoing worries over the eurozone debt crisis.
David Jones, chief market strategist at IG Index, said: "After weeks of falling markets, the old chestnut of M&A chatter has helped to lift sentiment and given blue chips a modest kick-start."
But he said it had been a cautious start to the week, with investors remaining dubious about the sustainability of any bullish movement.
At one stage the FTSE 100 was up 26 points after a strong opening on the US market, which was led higher after a flurry of corporate deals, including news that Timberland had agreed to a $2bn (1.23bn) takeover by rival outdoor clothing group VF Corporation. But London followed the US market back down again as investors continued to fret about the state of the American economy.
Sentiment in London was helped by a report that Lloyds intends to save 1bn by cutting 15,000 jobs. Shares in the part-nationalised bank gained 0.6p, or 1 per cent, to 47.6p.
Another gainer was Barclays, after it agreed to settle all complaints over payment protection insurance without quibble as long as they had been submitted by 20 April. The bank said the 1bn it had previously set aside would still cover possible compensation payouts, helping its shares add 3.9p to 260.4p.
Other risers included the two Kazakhstan-based miners, Eurasian Natural Resources (ENRC) and Kazakhmys, after weekend reports that Glencore is considering an offer for ENRC.
Analysts suggest ENRC would be a good fit for the recently floated Glencore. Shares in the Kazakh firm rose by 34.5p, or 5 per cent, to 776.5p, while Kazakhmys was up 26p to 1,235p.
Imperial Tobacco was among the fallers after a warning that profits are suffering in Spain and it is slashing prices to retain its market position. That sent the Lambert & Butler maker's shares down 29p at 2,056p.
P&O and Princess Cruises group Carnival also went into reverse, dropping 45p to 2,254p, on a warning it had underestimated the full impact on demand of conflicts in the Middle East and North Africa, and the earthquake and subsequent nuclear crisis in Japan.
On the AIM market, Majestic Wine unveiled strong results and plans to double its size over the next ten years, but this failed to impress investors. Shares dropped 20.3p to 450p.
The heaviest faller was Scottish mobile power group Aggreko after APR Energy, the number two company in the sector, agreed a takeover by Horizon, the cash shell run by former Pizza Express and Pearl Insurance backer Hugh Osmond.
The news led broker Numis to downgrade Aggreko from "hold" to "sell", amid fears the deal could result in stiffer competition.Aggreko shares were more than 3 per cent lower, off 61p at 1,874p.
But an upgrade and positive comment by broker Investec helped pump maker and engineer Weir add 2p to 2,031p.