Surge reported in travel sector

The FTSE 100 Index up 42.6 points to 4590.1 in mid-morning trading

FirstGroup's pursuit of a possible merger with National Express has boosted shares in its rival and caused other firms in the sector to surge.

National Express was one of the largest gainers in the FTSE 250 Index despite news it had rejected FirstGroup's advances.

Vodafone's reported interest in a bid for T-Mobile UK also attracted attention in the top flight in an otherwise lacklustre session, with the FTSE 100 Index ahead 22.1 points at 4263.1 by lunchtime.

A tie-up would give Vodafone 40% of the UK market by revenue, but this was not enough to inspire its share price, which edged 0.60p higher to 116.8p.

Meanwhile, a broker upgrade from Goldman Sachs for Lloyds Banking Group helped the blue chip to stand out, rising nearly 6% or 3.7p to 70.19p. The rest of the banking industry followed Lloyds' lead, with Royal Bank of Scotland up 1.19p to 39.32p and Barclays ahead 6.85p to 274.95p.

An upgrade also lifted car insurance group Admiral, ahead 36p to 892p, while life and pensions firm Prudential recovered from weakness last week to add 13.75p to 413p. Legal & General climbed 1.66p to 57.67p.

In the second-tier, debt-laden National Express surged more than 5% or 13.75p to 289.5p after it said it had rebuffed the approach from FirstGroup.

The interest boosted hopes of consolidation in the sector, with Arriva ahead 7.5p at 419.75p and Stagecoach up 3.75p at 128.5p.

Southern franchise owner Go-Ahead lost an earlier gain to fall 2p to 1235p, while FirstGroup retreated to 2.75p lower at 368p after its takeover target said it did not consider it appropriate to enter talks with its larger suitor "at present".

Another of the biggest gains in the FTSE 250 Index came from Hargreaves Lansdown after the fund management firm said it expected full-year results to be above of market forecasts. Shares bounced 8.5p to 209.5p, a gain of 4%.