London returns to the black as bid talk boosts sentiment

Cadbury shares passed 800p as investors bet on a higher offer from US giant Kraft later today, but IP slid more than 3 per cent as talks over a possible tie-up with France's GDF-Suez ended.

The wider FTSE 100 Index made decent progress, up 39.02 points to 5494.39 although there was little direction from US markets, which were closed for a public holiday.

Oil rallied above $78 per barrel yesterday, snapping a five-day losing streak as the dollar eased against a basket of currencies.

Oil prices began last week above $80, supported by colder winter weather in the northern hemisphere and an influx of fresh capital from money managers and funds wishing to allocate more cash to commodities this year.

US crude for February delivery was up 47 cents at $78.47 a barrel, after earlier touching a three-week intraday low of $77.07. London Brent crude rose 24 cents to $77.35.

The pound meanwhile was trading above 1.63 against the dollar, while worries over Greece's fiscal position helped it hit a four-month high of almost 1.14 against the euro.

But it was M&A activity which grabbed attention in dealing rooms with Kraft thought to be preparing an offer of between 820p and 830p a share, which would value Cadbury at up to 11.4bn

Cadbury shares were 14p, or 2 per cent, higher by the close of play, but at 8071/2p this was below the rumoured price as investors cast doubt on Kraft's chances of success. Major shareholder Standard Life Investment said Kraft would need to pay 900p.

Takeover speculation also caused shares in International Power to rise by 10 per cent at one stage before plummeting down in a reversal of fortune.

The majority owner of the Rugeley coal-fired power station in Staffordshire was the subject of talk about a tie-up with France's GDF-Suez, including a possible takeover.

IP shares were at the top of the risers' board, but finished the day as the leading faller after it said the talks were over. Shares fell 11p to 311p.

Elsewhere, miners enjoyed another strong session after Eurasian Natural Resources lifted 381/2p to 1030p, and Anglo American cheered 861/2p to 2809p.

Meanwhile, retailers were on the risers' board even though broker Citigroup reduced its price target on six retail stocks. Marks & Spencer shares, which have been battered in recent sessions, recovered 11p to 3605/8p, while Home Retail Group added 63/4p to 2673/4p.

In other retail news, internet fashion firm ASOS slipped 7 per cent as it reported a slowing in sales growth over the five weeks to the start of January.

Sales were up 30 per cent for the period, but analysts noted this was below the trend reported in November. Shares were 33p lower at 435p.

Back in the top flight, BSkyB fell 1 per cent – down 61/2p to 567p – after BT said it planned to undercut its rival on the price of its Sky Sports channels if a regulatory probe forces the pay-TV firm to drop its wholesale charges.

Elsewhere, Tullow Oil featured on the FTSE 100 Index risers' board after the oil explorer said it was close to the biggest deal in its history by exercising rights to buy 800m of Ugandan oil fields. Shares lifted 30p to 1369p.

The biggest Footsie risers were ENR, Anglo American, Lloyds Banking Group up 13/4p to 585/8p and M&S.

The biggest Footsie fallers were International Power and Man Group 43/8p lower at 2881/4p.