A positive US ruling for cigarette makers boosted British American Tobacco, with the shares rising 3.2 percent. A US appeals court rejected a US government bid to force cigarette makers to pay $280 billion in past profits late on Friday.
Morgan Stanley repeated its "overweight" stance on BAT saying: sting' has now been drawn from the US government's claim against US tobacco companies."
The FTSE 100 index closed up 38.3 points or 0.8 percent at 4,979.8, a gain of 3.4 percent since the start of the year and around its highest level since mid-2002, when the index was in retreat from readings above 5,200.
Paul Kavanagh, Head of Market Strategy at stockbrokers Killik, said the momentum in the FTSE was drawing in investors and the market could push on once it consolidates above 5,000.
"This market was trading quite comfortably around 5,200 in the post September 11 (2001) period and I see no reason why it shouldn't be above there. It's about rebuilding confidence, it won't go in a straight line but you do feel that it's gaining some traction," he said.
Miners rose again, with Antofagasta up 3.2 percent and Rio Tinto up 1.5 percent, boosted by the prospect of prospect of strong commodities demand and prices, largely fuelled by demand from China. Steelmaker Corus was buoyed for the same reasons and the stock - which has been the subject of take-over talk - closed up 0.9 percent.
"The China story is building more and more momentum. You're seeing it at it's crudest form in the miners, they are just the early way to play this story," said Kavanagh.
Oil stocks were also firm, with BP adding 1.1 percent as dealers said it should shed more light on its buyback strategy alongside the release of what are expected to be record profits on Tuesday.
Shares recently at the centre of bid speculation had mixed fortunes with logistics firm Exel down 1 percent as investors wait for a bid from the United States or Europe to materialise. Dutch bank ABN Amro downgraded its rating on the stock to "hold" from "buy" following the persistent bid speculation.
Spirits maker Allied Domecq, subject of talk last week that French drinks giant Pernod Ricard might be interested in making a move, gained 2.3 percent.
Banking group Standard Chartered firmed 0.8 percent after a weekend report said US banking giant Citigroup was mulling buying a 13 percent stake in the Asia-focused bank. Dealers said speculation that the Khoo family could sell its stake was not new, but the talk appeared to be gathering pace and it could lead to a full take-over.
Among the midcaps, music group EMI dropped 16.4 percent after it warned of lower than expected music sales and profits, citing delays in the release of albums from groups including Coldplay.
Car rental firm Avis Europe jumped 10.4 percent as talk of a bid for the firm swirled, although dealers were sceptical, given the company is 60 percent owned by a Belgian car seller.
Football club Manchester United closed 4.8 percent higher after it said it had received a detailed proposal from US entrepreneur Malcolm Glazer, which may lead to a take-over of the world's richest soccer club.
The midcap bid action pushed the FTSE Midcap 250 to a fresh all-time high of 7,322.8, before the index closed 25.5 points higher at 7,320.9.