The FTSE 100 Index ended yesterday above the 4900 barrier as takeover talk sent a buzz through the City.

The Footsie broke the 30-month high again during the session, closing 53.9 points ahead at 4906.2.

Logistics firm Exel led the pack higher after speculation of an imminent takeover bid by UPS pushed shares in the group to their highest mark for two and a half years.

Bid rumours swirling around Sainsbury's and glass maker Pilkington also kept investors on their toes.

News that the UK's manufacturing sector grew at its slowest pace for 18 months further boosted shares, allaying investors' fears of a rate hike by the Bank of England next week.

The market also took a gloomy view of official figures showing that mortgage lending increasing slightly in December, with some analysts highlighting that the underlying trend in the housing market remained negative.

Dwindling fears about rate rises were also lifting shares on the other side of the Atlantic. The Dow Jones Industrial Average pushed 62 points ahead to 10552 shortly after London's close as news that US manufacturing grew at its slowest pace since September 2003 calmed jitters about a hike.

Exel was top of the Footsie with a nine per cent or 72p gain to 873p on the back of the bid talk, but miners and petrochemical stocks were also having a good day.

Miners dominated the risers after a positive analyst note lifted the sector and investors geared up for a decent set of results from Rio Tinto tomorrow.

Xstrata was the sector's top riser, putting on 38.5p to 963.5p, while Anglo American was close behind rising 47p to 1279p. BHP Billiton added 22.5p to 679.5p and Rio Tinto advanced 53p to 1703p.

BP was 14p ahead at 537p and Shell was up 15.5p at 479p, while Cairn Energy added 8p to 1120p.

Gases group BOC added 3p to 985p after reporting profits at the top end of expectations.

Investment group Amvescap recovered recent losses to stand three per cent or 12p ahead at 360p as investors welcomed its results and bid talk continued to circulate.

The FTSE 250 index closed at 7225.4 - its highest level since its launch in October 1992.

But second-tier stock Virgin Mobile was down seven per cent or 19p to 246p as slower-than-expected growth in customer revenues overshadowed news that it added a record number of new users over the Christmas quarter.

Top flight telecoms were also dragged down, with mmO2 falling 1.75p to 124p and Vodafone weakening 0.25p to 136.75p.

In the lower tiers, stockbroker Teather & Greenwood lifted 5p to 73.5p after agreeing to a £43m takeover by Icelandic bank Landsbanki. Floor coverings group Carpetright lost two per cent - off 25p to 1135p - after reporting a "tough" January sale in the UK and Ireland.