By Rebekah Curtis
LONDON (Reuters) - Britain's blue-chip index rose 1.2 percent at midday on Friday, as bid activity powered British Energy and crude price stormed past $125 a barrel to inject zest into heavyweight oil shares.
Oil major BP added 1.6 percent and rival Royal Dutch Shell rose 2.1 percent as U.S. crude oil surged on a weaker dollar and a bullish market for distillate fuels as China and Europe scramble for diesel amid thin global supplies. BG Group put on 1.6 percent.
Topping the gainers, shares in London Stock Exchange surged 7.8 on market talk of bid interest after Sanford Bernstein said in a report the fall in its share price has made the UK bourse an affordable target of rivals Nasdaq and NYSE Euronext.
Nuclear power generator British Energy leapt 6.5 percent to 724 pence after saying it had received a range of takeover proposals, including some priced above Thursday's 680-pence close. For more double-click on.
By 1129 GMT, the FTSE 100 was up 75.4 points at 6,327.2, as shares forged higher across Europe. U.S. stocks looked set to extend gains after the S&P 500 ended the previous session at its highest close since January.
"The market's been incredible lately," said Colin Morton, an investment director at Rensburg Fund Management. "People are getting a bit more optimistic that life is getting a little better."
He added, however, that is was too early to have confidence in a sustained upturn. "I'm a little nervous of the market because it's had such a strong run in such a short period and some of the issues that we've had could come back to haunt us."
BA TAKES OFF
Bolstering sentiment, British Airways climbed 6.1 percent after announcing a dividend of 5 pence, the first payment since 2001, and lifting annual profits 45 percent.
The airline also said it is braced for a turbulent year with fuel costs set to rise 1 billion pounds.
Banks also pushed higher, with HBOS up 2.4 percent, Standard Chartered rising 2.2 percent and Lloyds TSB 2 percent higher.
Royal Bank of Scotland (RBS) fell 1.3 percent, however. Warren Buffett's Berkshire Hathaway Inc has pulled out of the bidding in the 7 billion pound auction of its UK insurance business, the Financial Times reported. RBS was not immediately available to comment.
The Bank of England reiterated on Friday its mortgage swap plan has no upper limit and refused to speculate on any final total after media said banks could exchange assets worth nearly twice the initial estimate.
The Financial Times newspaper, citing debt market sources, said British banks may be preparing to swap between 80 and 90 billion pounds of hard-to-shift mortgage-backed assets for highly-tradable government debt to free up their balance sheets.
Sainsbury dropped 1.3 percent to extend recent losses after recent negative broker comments which followed the supermarket group issuing results on Wednesday.
