FTSE up 0.6 percent

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At 8:33 a.m., the FTSE 100 was up 40.4 points at 6,502.3, after the Dow Jones industrial average powered passed the 13,000 level for the first time on Wednesday.

European shares also rose.

"We are buoyed by M&A activity and sentiment in the U.S.," said David Buik of Cantor Index. "But we are now at a crossroads. We need to be extremely careful. There are still a number of bear squeezes out there."

The bid battle for ABN AMRO continued with the Dutch bank saying it would open its books to a consortium led by Royal Bank of Scotland, which has made a 72 billion euro (49 billion pound) rival bid for the bank. ABN had earlier agreed to a 65 billion euro buyout deal with Barclays.

Barclays gained 0.5 percent, while RBS fell 0.5 percent.

Elsewhere in the banking sector, HBOS advanced 1.1 percent after rising 3.5 percent on Wednesday, when it said it was confident of beating market earnings forecasts for 2007. Lloyds TSB gained 0.8 percent and Bradford & Bingley tacked on 1.2 percent.

Oil shares also rose as Brent crude prices hovered above $68 a barrel. Royal Dutch Shell climbed 0.2 percent, while BG Group put on 0.3 percent.

The Wall Street Journal said Royal Dutch Shell and its partners had agreed to pay a substantial annual dividend to the Russian government as part of a deal to salvage the $20 billion Sakhalin 2 venture.

In the mining sector, BHP Billiton advanced 1.1 percent, Rio Tinto added 1.2 percent, Anglo American tacked on 1.4 percent and Xstrata rose 1.1 percent.

Among other individual movers, caterer Compass climbed more than 3 percent to top the gainers' list after France's Sodexho Alliance said first half net profit rose a stronger than expected 24.2 percent and revised up its full year guidance.

Vodafone nudged up 0.5 percent despite the Financial Times saying the cost to the mobile phone giant of buying a controlling stake in India's Hutchison Essar may turn out to be more than $11.1 billion the firm agreed to pay.

Legal & General was one of the five losers in the FTSE 100, down 0.3 percent after the insurer said its sales climbed 6 percent in the first three months of 2007, at the lower end of market expectations.

Drax put on 0.8 percent after the operator of western Europe's biggest coal fired power station said it was trading in line with expectations, reflecting its contracted position amid a volatile power market.

Among mid caps, ARM Holdings surged 4.2 percent after the British chip designer posted first quarter profit in line with expectations and promised to step up its share buyback programme and dividends.