FTSE ends higher, bid talk boosts BAA, Corus

Leading UK shares closed higher on Friday but finished the week with a moderate loss as the market's recent choppy trading pattern, sparked by inflation and interest rate jitters, persisted.

Bid talk, a factor which helped to fuel the rise to April's five-year FTSE 100 index highs, re-emerged, pushing up airport operator BAA and steel maker Corus, while health and beauty retailer Boots rose 2.9 percent, rallying after a dip at midweek when it traded without the right to its latest dividend payout.

U.S. jobs data came in weaker than expected and painted a mixed picture about the economy and interest rates, spurring swings in Wall Street shares and an erratic last hour of business in London.

The benchmark index closed 14.9 points higher at 5,764.6 after travelling over a near 60-point range through the day, continuing the run of volatile business seen since interest rate worries triggered a sell off around the middle of May. The index is down 26 points on the week.

The big question is when is this volatility going to stop? said Henk Potts at Barclays Stockbrokers.

I guess it's when the uncertainty is over surrounding the market over the threat of inflation and how aggressive the Fed has to be about interest rates and what that means for the global economy and corporate profitability growth, he said.

Dave Bradbury, head of equities at Canada Life, said the markets remained nervous but he believed that fundamentals for the UK share market had not changed much in the last few weeks.

You're still getting some pretty reasonable earnings and dividends growth, good buy backs. Companies have solid balance sheets and the ratings don't look that high, said Bradbury.

BAA REACHES HIGH

Shares in BAA hit a record 907 pence, trading above Grupo Ferrovial's offer price of 900p per share for the first time, on speculation that Citigroup was buying up a stake in the UK airports operator on behalf of the Spanish construction firm.

A source familiar with the situation told Reuters the move was intended to block any formal offer from U.S. investment bank Goldman Sachs. The UK Takeover Panel said on Friday that Goldman had until June 9 to declare whether it would make a formal offer for BAA.

People are tending to think that perhaps they will come in. It's a question now of sooner rather than later if they do. They can't sit on their hands, said a trader.

Corus added 2 percent as talk persisted that Roman Abramovich, owner of English soccer club Chelsea and Russia's richest man, was in talks with the Anglo-Dutch steelmaker to buy a stake.

Mid-cap housebuilder McCarthy & Stone was a standout feature, rising 15.2 percent after it said it had received approaches that could result in an offer for the company.

On the downside, drugmaker GlaxoSmithKline slipped 0.9 percent on worries that it might overpay for Pfizer's consumer healthcare business. People familiar with the situation told Reuters that Glaxo was expected to bid more than $15 billion for the unit, at least $1 billion more than analysts had estimated the arm would fetch.

Mid-cap London Stock Exchange was up 1.8 percent after the NYSE Group struck a deal to buy European bourse operator Euronext.

Whilst the merger does not give the NYSE direct access to either of Europe's biggest markets, in London and Frankfurt, effectively it has the remainder, said Hargreaves Lansdown Stockbrokers head of UK equities Richard Hunter .

The question now is whether the LSE or Deutsche Boerse move on to the front foot to ensure defensive consolidation and, if so, how they achieve this -- via a merger of equals between themselves or via a counter move towards Nasdaq.

(Additional reporting by Matt Falloon)