The London market got off on the front foot on Tuesday as merger and acquisition activity inspired traders.
The FTSE 100 Index rose 33.47 points to 6538.6p as Switzerland's Zurich Insurance confirmed speculation that it was considering a possible £5bn takeover bid for RSA.
Proactive Investors revealed last week that talk was swirling around the market about a possible bid for the insurer, which has undergone a shake-up under new chief executive Stephen Hester. Names also in the frame included Germany's Allianz and Generali of Italy.
Zurich said in a statement: "Zurich notes the recent market speculation in relation to RSA Insurance Group PLC and confirms that the company is evaluating a potential offer.
"This announcement does not amount to a firm intention to make an offer and there can be no assurance that any offer will be made."
RSA declined to comment when Proactive approached it about the speculation last week.
RSA's shares were near the top of the Footsie risers, lifting 49.3p to 487.1p.
Generic drug group Hikma Pharmaceuticals (LON:HIK) also fuelled the upbeat sentiment by agreeing to buy US rival Roxane Laboratories Inc. and Boehringer Ingelheim Roxane Inc, from Boehringer Ingelheim. Hikma's shares rose 134p to 2214p.
The takeover talk helped the Footsie to recover from a tough session on Monday triggered by the second biggest fall in Chinese shares since the turn of the century.
Disappointing Chinese economic data on Friday contributed to yesterday's fall but the main catalyst was the fear of a withdrawal of the support measures which have been in place for about three weeks now.
The IMF has also expressed its wish for China to allow market forces to sort things out. Investors around the globe will be watching Chinese markets again today.
On Wall Street, the Dow Jones lost 128 points to 17,441 and the Nasdaq and S&P500 also lost ground as the Chinese effect rubbed off along with a clutch of disappointing company earnings data in recent days.
A busy week for corporate news picked up pace with oil titan BP (LON:BP.) reporting lower profits on the back of falling oil prices.
But investors appeared to take a lenient view of the results as boss Bob Dudley vowed to "rebalance" the company in line with the lower prices.
Meanwhile, high street favourite Next (LON:NXT) ticked up 170p to 7670p after it increased its profit guidance after a July weather boost.
Next’s shares fell after it reported its full-year results in March but have since rebounded strongly and reached record levels last week.
Regulators delivered a blow to Royal Mail (LON:RMG), sending its shares down 16.5p to 487.5p, after accusing the former state-owned postal operator of discriminating against rivals with planned price changes.
But broadcaster ITV (LON:ITV) advanced 6.5p to 270.2p as it turned in strong first half results.