The FTSE 100 is up 26 points, or 0.47%, to 5,573.9, as mining stocks are tracking gains in Australia and BAE Systems is gaining on hopes for a Saudi Arabian aircraft deal.
BAE systems is up 11.5p, or 3.31%, to 359.25p, after reports Saudi Arabia's defence minister said a deal with Britain for military aircraft should be sealed soon.
Among mining stocks, Rio Tinto is up 41p, or 1.6%, to 2,605p, while Antofagasta has gained 29p, or 1.6%, to 1,836p. BHP Billiton has advanced 16.5p, or 1.82%, to 922.5p, with BG Group also up 8.5p, or 1.51%, to 572.5p.
Elsewhere, catering group Compass is down 3.75p, or 1.71%, to 216p, as dealers said about 30 million of its shares were being placed by Citigroup.
Reinsurance broker Benfield has gained 0.92% to 355.5p, on speculation of an offer from Jardine Lloyd Thompson, while video game company SCi Entertainment has added 2.45% to 605.5p, on talk of interest from a US rival.
In Japan the Nikkei 225 Stock Average rose 316.31, or 2% to 15,957.57 at its close a short time ago, as exporters were boosted by a gain in the dollar versus the yen.
Exporters led the Nikkei higher after the dollar's gain boosted the value of their dollar-denominated sales. The US currency rose more than 1 yen to 117.25 yen in New York from 116.14.
Matsushita Electric Industrial Co., the world's largest consumer electronics maker, rose 45 yen, or 2.1%, to 2,245, while Toyota, Japan's biggest carmaker, advanced 100 yen, or 1.7%, to 5,880, as the company had 60% of its sales outside Japan last fiscal year. Honda, which gets as much as 70% of its operating profit from the US, also rose 110 yen, or 1.6%, to 6,810.
Property stocks also gained, with Mitsubishi Estate, Japan's biggest property developer by value, jumping 255 yen, or 12%, to 2,445, while NTT Urban Development, a real estate leasing company, soared by the exchange's daily imposed limit of 100,000 yen, or 15%, to 763,000.
Meanwhile, Chiyoda led an advance among construction stocks on expectations increasing demand for liquefied natural gas will allow the companies to win more orders to build LNG plants.
Chiyoda surged 315 yen, or 13% to 2,815, while JGC, Chiyoda's smaller competitor, jumped 125 yen, or 5.8%, to 2,290. Toyo Engineering, another plant engineering company, also gained 20 yen, or 3.5%, to 590.
In the US the Dow Jones Industrial Average fell 30.98 points, or 0.29%, to 10,805.55, led lower by General Motors amid signs US carmakers were losing ground to Japanese rivals.
GM fell 5.7% to $19.85 after hitting an 18-year low, as Toyota Motor unveiled plans to increase production for 2006, suggesting it could overtake GM as the world's largest carmaker.
Elsewhere, Morgan Stanley gained 1.8% to $57.71, after it posted quarterly profit that topped Wall Street expectations, while American Express rose almost 1% to $51.75 to help boost the Dow.
Other advancing stocks included Boeing, which gained 1.1% to $70.74, after a Hong Kong airline said it plans to buy as many as 40 planes over the next five years.
But pharmaceutical stocks slipped with Pfizer dropping 1.3% to $24, a day after a court ruling pushed the stock up almost 8%.IFAonline
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What made financial headlines over the weekend?