HSBC said it was in talks to buy up to 70 per cent in South Africa’s fourth-largest bank, Nedbank, in which insurer Old Mutual has a controlling stake.
HSBC added 0.8 per cent and Old Mutual rose 3.2 per cent, while life insurers advanced 2.5 per cent and Aviva, which has rejected a bid approach from rival RSA for some of its insurance units, gained 3.6 per cent.
The FTSE 100 closed 39.56 points higher, or 0.8 per cent at 5,234.84, after losing 1.5 per cent last week -- its worst weekly percentage drop in seven weeks.
Volume on the UK benchmark was only half of its 90-day daily average.
The index is trapped between 5,310.82, its 50-per cent Fibonacci retracement of the peak in April to the low on 1 July, and 5,187.41, its 38.2-per cent retracement level.
Sentiment has been aided by a slew of merger and acquisition activity, even through data from the United States and other parts of Europe is pointing towards a slower global recovery.
Miner BHP Billiton faced a battle for the takeover of Potash Corp after the board of the Canadian company urged shareholders to reject BHP’s hostile $39bn (£25bn) offer and said it was in talks with potential suitors for a superior deal.
BHP put on 0.5 per cent, in line with a 0.5-per cent gain for the mining sector. However, Jawaid Afsar at Securequity said the low volume signalled investors were not convinced.