The FTSE 100 has closed 39.5 points, or 0.71%, higher at 5,587, as BAE Systems leapt on news of a UK/Saudi Arabia government tie-up.
The defence group, BAE systems, added 22.25p, or 6.4%, to 370p, while Rolls Royce also helped the advance with gains of 10p, or 2.45%, to 418.5p, as it benefited from news of a EUROJET Turbo consortium contract win worth €300m.
Reuters also performed well, climbing 12p, or 2.94%, to 420.5p, closely followed by Hanson which advanced 15.5p, or 2.51%, to 632p.
Compass topped the fallers, with a drop of 3.5p, or 1.59%, to 216.25p, on news of a shares placing, while United Utilities dropped 8.5p, or 1.24%, to 677p, after going ex-dividend.
Meanwhile, shares in outdoor advertising group Maiden soared 20.39% to 91.5p, after the company said it had received preliminary approaches from a number of interested parties.
In the US the Dow Jones Industrial Average is up 84.93 points, or 0.79%, to 10,890.48, as a flurry of acquisitions in the technology and real estate sectors sparked what some analysts say is the start of a year-end rally.
IBM, the world's biggest computer company, has gained 1.6% to $83.80, as it said it would buy software developer Micromuse for about $865m.
In other technology deals, mobile phone microchip maker Texas Instruments has climbed 1.6% to $32.35, as it said it would pay $200m for Chipcon, a designer of short-range low-power wireless devices.
Meanwhile Seagate Technology has added 1.73% to $19.94, after it announced plans to buy rival computer disk-drive maker Maxtor for $1.9bn in stock, aiming to cut costs and drive development of new products.
Helping the Dow, shares of American International Group have risen 1.9% to $66.69 on news that the insurance giant is in talks with a Japanese real estate developer about buying a Tokyo property worth $3.5bn.
Elsewhere, General Electric, has fallen slightly with a drop of 0.23% to $35.46, as it and other investors are in advanced talks to buy real estate investment trust Arden Realty in what would be one of GE's largest real estate purchases.IFAonline
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First mentioned in Cridland Report
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