Kraft's $16.7bn Cadbury bid boosts FTSE

Britain's top share index gained 1.4 per cent early on Monday, boosted by improved investor sentiment on news of a $16.7 billion bid for Cadbury from US-based Kraft Foods, while commodity stocks were also in demand.

By 0815 GMT the FTSE 100 was up 69.61 points at 4,921.31, after closing up 1.2 per cent on Friday, posting its biggest percentage gain in two weeks as it snapped a three-session losing streak.

Cadbury surged 37 per cent after Kraft Foods, North America's biggest food group, released details of the bid, which was rejected by Cadbury, the world's second-largest confectionary group.

The news also helped lift Unilever, up 2.8 per cent, while Associated British Foods gained 3.3 per cent and touched a 14-month high after the food and retailing group increased its full-year earnings forecast on the back of strong results from its Primark discount chain.

Analysts said the move by Kraft would foster more talk of takeover activity, a positive for the broader market.

"(The Kraft approach for Cadbury) is a positive in terms of M&A activity, and further afield in retail, Associated British Foods is looking good after the Primark results," said Richard Hunter, head of equities at Hargreaves Lansdown.

A returning sense that the world's economy is on a path to a swift recovery was driven by data showing US non-farm payrolls fell by 216,000 in August, fewer than a forecast of 225,000 job losses. The unemployment rate, however, rose to 9.7 per cent.

Investors nerves were also soothed as G20 finance ministers and central bankers agreed to keep economic stimulus measures in place for longer.

G20 finance leaders on Saturday took aim at excessive bank pay and risk-taking at the root of the financial crisis and insisted trillions of dollars of emergency economic supports would be needed for some time.

China is experiencing a "V" shape economic recovery and growth will be back to normal by 2010, the official Xinhua news agency reported on Saturday, quoting an adviser to the central bank.

A sense that the economic recovery is on track helped boost metal prices and miners with Rio Tinto, Xstrata, Anglo American and Kazakhmys gaining 1.3-1.5 per cent

Lonmin jumped 7.5 per cent after weekend press reports that Xstrata said it asked its bankers to study the viability of a new 3 billion pound bid for the platinum producer.

Energy stocks were also positive with Royal Dutch Shell, BG Group, Tullow Oil and Cairn Energy adding between 1.6 and 1.9 per cent.

With the U.S. closed for the Labor Day, however, the Cadbury news was the biggest influence on the market, helping to lift other defensive sectors such as tobacco and beverages.

British & American Tobacco added 1.6 per cent, Imperial Tobacco added 2.5 per cent while Diageo and SABMiller gained 1.5 and 2.8 per cent, respectively.

HSBC was one of a relatively small number of stocks in negative territory, down 0.5 per cent after a report that it had made a bid of about £1 billion ($1.63 billion) for Dutch financial group ING's private banking businesses.

Later in the week, investors will look at the Bank of England's latest announcement on interest rate policy, scheduled for 1100 GMT on Thursday - although the expectation is that there will be no change in policy, either on interest rates or quantitative easing.