Bid rumours were swirling round the oil exploration and production sector again yesterday. This time Premier Oil was in the frame.

Its shares rose 6.2 per cent to £12.40 amid talk it could be a takeover target for Santos, an Australian rival with a market capitalisation of £3.7 billion.

In light of the recent bid approaches for Burren Energy, up 3 per cent to £12.10, traders said the Premier rumour could not be dismissed.

Premier has been in takeover talks before. It ended discussions with an unnamed bidder, believed to be Dubai Energy, last December.

Sector watchers pointed out that Santos was looking to expand and had pulled out of the US to concentrate on Asia, where Premier has some of its most exciting prospects.

Santos has a stake in one of Premier's Vietnamese oil fields.

Leading shares bounced back from yesterday's losses. Showing no fear ahead of the US interest rate decision, the FTSE 100 climbed 62.6 points, or 0.9 per cent, to 6,721.6, leaving it just 11 points short of a seven-year high. The FTSE 250 rose 186.9 points, or 1.6 per cent, to 11,666.

DSG International led the FTSE 100 higher. Shares in the electricals retailer rose 7.1 per cent to 129½p as rumours of interest from Best Buy, the largest US consumer electronics chain, saw short sellers scramble to buy back positions.

After the close, DSG said it had repurchased one million shares for cancellation. Had DSG been in takeover talks, it would not be allowed to repurchase stock.

Mitchells & Butlers, the pub and restaurant company, was also in demand, rising 6.5 per cent to 665½p as investors realised that Irish racing barons, JP McManus and John Magnier, had taken a 3.4 per cent stake through an investment vehicle called Elpida Group. As with DSG, traders said the news had triggered a wave of short covering. About 17 per cent of M&B issued share capital is thought to be on loan. - (Financial Times service)