LONDON (REUTERS) - Corporate activity in the pharmaceutical sector on Tuesday pushed Britain's benchmark stock index to a two-week high and to within sight of a peak for this year.
Drugmaker AstraZeneca rose 4.7 per cent, with trading volumes in the stock more than three times its 90-day average, after the Sunday Times reported a 60-billion-pound ($126.8 billion) approach from US peer Pfizer.
Both companies declined to comment. Analysts at Citigroup said in a research note they expected Pfizer "to push aggressively ahead with a second approach", referring to the reported rejection of the offer. Pfizer stock rose 1 per cent.
GlaxoSmithKline rose 5.2 per cent after an asset-swap with Swiss peer Novartis, which announced a multi-billion dollar revamp. Shire rose 7.6 per cent on hopes that sectoral takeover activity would spread.
"M&A activity shows a certain confidence on the part of the executives of the companies. The AstraZeneca would be one of the biggest deals ever done for a London-listed company," Jasper Lawler, market analyst at CMC Markets, said.
"It's true to say that when deals like this come off, more follow suit. People have put a quick bet in there (on Shire) hoping that they could be the recipient of some other kind of deal," he said.
The blue-chip FTSE 100 index closed up 0.9 per cent, or 56.51 points, at 6,681.76 points. The UK stock market had been closed since Thursday for the long Easter weekend holiday.
The FTSE 100 hit a peak of 6,867 points in late January, its highest level since early 2000 and is now less than 3 per cent below that level, having recovered from a slide driven by concern over a slump in emerging markets economies and tension between Russia and Western powers over Ukraine.
However, it has been stuck in a 200-point range for the last six weeks. Tuesday's move took the index to the top end of that range, but analysts were cautious.
"We're still in quite a wide range, and there hasn't been too much outside of the pharma sector to make us think that we'll break out of it soon," Jeremy Batstone-Carr, analyst at Charles Stanley, said.
"(However), there's nothing like a bit of M&A to excite investors and coalesce interest in relation to the market generally. It shouldn't be taken as a sign of the top of the market."
The index finished below its intraday high - its highest since April 4, and technical analysts said it was too early to tell whether the challenge to the resistance area could be sustained and if the index would break out of the range.
"The FTSE 100 cash index is posting a rebound but is challenging the upper end of the short term trading range at 6,706," Trading Central technical analyst Nicolas Suiffet said.
"It's too early to turn bullish again. Only a clear break of the resistance area 6,706/6,723 would reinstate a positive bias," he said.