Leading shares closed firmly ahead, at an intraday high, with M&A talk fuelling gains in the insurance sector and a large deal in the US buoying airline stocks, while Wall Street remained on positive terrain, dealers said.

The FTSE 100 index ended Wednesday's session 43.2 points ahead at 6,229.8, while the broader indices also rallied.

Volume was solid, with 3.04 billion shares changing hands in 389,785 deals.

Vodafone was the most traded stock, seeing 448 million units change hands, followed by BP, which saw 87.9 million shares switch owners.

Meanwhile, across the pond, US stocks were marked higher as investors examined an 8 billion US dollars bid from US Airways Group for Delta Air Lines and awaited minutes from the Federal Reserve's meeting last month for hints on what the central bank may do in 2007.

The Dow Jones was up 18.20 points at 1,396.35 at the UK close, while the Nasdaq Composite rose 10.14 points at 2,440.80 and the S&P 500 index ended 3.15 points ahead at 1,396.35.

In London, staying with economic news, the Bank of England's latest quarterly Inflation Report released earlier Wednesday proved to be fairly dovish and provided some cheer.

The BoE said UK inflation will return towards target quicker than it anticipated just three months ago, with the headline rate actually dipping below 2 percent if one more rate rise materialises.

On the corporate front, shares in British Airways were airborne following its announcement it has reached an agreement in principle with trustees of the New Airways Pension Scheme over a ten-year funding plan to tackle its 2.1 billion sterling deficit.

The UK flagship carrier said it will increase its one-off cash injection to 800 milllion sterling from 500 million and offer to pay up to 50 million sterling a year for the next three years, subject to the airline's year end cash balances remaining above 1.8 billion and on staff accepting future benefit changes.

The shares closed up 21.75 pence at 485 -- a jump of 4.7 percent -- with the shares rising further following the pensions fund news after already gaining on the back of the US Airlines bid for Delta.

Separately, BA announced it has raised its stake in Spanish flag carrier Iberia to about 10 pct after purchasing American Airlines' remaining 1 percent holding for about 13 million sterling.

M&A talk also fuelled gains in the insurance sector, with Royal & Sun Alliance 3.75 pence to the good at 152 following reports in Copenhagen that Finnish insurer Sampo may be interested in the UK group.

Having recently sold its banking unit to Danske Bank for just over 4 billion eur, Sampo is now cash-rich and insurance-focused, although, when questioned, group CEO Bjorn Wahlroos said he had "no specific plans on how to use the proceeds".

Sector peers also rose, with Prudential adding 11.5 pence at 661.5, Friends Provident taking on 2.75 pence at 215.75 and Old Mutual was the second best blue chip performer of the day, 6.25 pence -- or 3.63 percent -- ahead at 178.5.

The latter was also helped by Bear Stearns hiking its target price to 215 pence from 200 and reiterating its 'buy' advice on the life insurer.

Still among M&A items, BAE Systems added 3 pence at 421.75 on a report the UK government is once again putting pressure on VT Group to agree the framework of a deal to merge its shipbuilding assets with the defence giant.

The Times says the groups are now in talks to consolidate what remains of the British shipbuilding industry, though rival Babcock is not thought to be involved.

Elsewhere, buyers came for Vodafone, 3.5 pence to the good at 139, after the mobile phone giant was upgraded to 'buy' from 'neutral' by Deutsche Bank following better-than-expected results yesterday.

The broker said following robust reporting from Vodafone's associate assets, results in the core businesses were slightly ahead of expectations, further buoyed by lower tax and tax liability deferrals.

It added that although the fundamentals remain difficult, it sees further potential upside to consensus estimates from two sources -- in-market consolidation and further cost saving.

Capita was another gainer, adding 8.5 pence at 575.5, after draft plans to introduce London-style congestion charging zones and road tolls across the UK were unveiled as part of the Queen's speech.

Capita was awarded the contract to develop the technology for London's congestion charge in 2001.

Meanwhile, Scottish & Southern Energy climbed up 25 pence at 1,428 after being reiterated at 'buy' by Merrill Lynch with a raised price target of 1,500 pence, up from 1,340, after solid results from the UK utility.

Still among utility plays, United Utilities took on 12 pence at 767.5 after Goldman Sachs upgraded the stock to 'neutral' from 'sell'.

Turning to the miners, Anglo American ended the session 44 pence firmer at 2,484 after announcing it is examining the possibility of constructing a coal mining and processing facility in China worth around 4 bln usd, chairman Mark Moody-Stuart said.

On the downside, meanwhile, a double downgrade to 'neutral' from 'buy' by UBS and Merrill Lynch on valuation grounds weighed down shares in Kingfisher, down 5.5 pence at 266.25.

UBS told clients that the shares have almost reached their 280 pence price target. With UK interest rates rising and expected to impact on funding costs and possibly on demand, it prefers to downgrade the retailer's shares rather than raise the price target at this stage.

Merrill Lynch, meanwhile, said the shares have already passed its target of 270 pence and it finds it hard to justify a higher price objective without an earnings upgrade ahead of the group's third quarter numbers on Nov 30.

But Lonmin was the main casualty, down 125 pence -- or 4.06 percent -- at 2,956, as hopes of a 3,800 pence per share bid for the platinum miner failed to materialise alongside disappointing full year results.

The group said full year pretax came in at 633 million US dollars, up 98 percent, but Merrill Lynch said earnings were 13 percent below its expectations and about 11 percent lower than consensus.