A more confident tone returned to London's stock market at the start of a week of crucial monetary policy decisions across the globe.

With interest rate rises seen as a possibility in the US, the UK and the euro zone, there was some initial mild surprise at the extent of the strength in London equities.

Some traders felt the markets had mostly factored in the prospect of rate increases in all three regions at some point in the near future.

But the real reason behind the fizz in London was another flurry of takeover activity on both sides of the Atlantic. In the US, news of a €70 billion-plus (£42.6 billion sterling) counter-bid for Sprint, the US telecoms carrier already in merger talks with MCI, sent Wall Street sharply higher - it posted three-figure gains shortly after the US session began.

Dealers said the market had picked up the scent of takeover news at the start of the session and ran ahead strongly as the stories intensified.