By Tricia Wright

LONDON (Reuters) – Britain’s top shares advanced on Tuesday, led by InterContinental Hotels Group (IHG), one of the latest stocks to be boosted by reports of deal interest.

IHG jumped 5.7 percent – the top FTSE 100 riser by some margin – in trading volume at more than a third of its 90-day daily average after only an hour’s trade.

The hotelier has rejected a 6 billion pound takeover offer from a U.S. bidder, Sky News reported, citing unidentified sources.

The news gave strength to a view that the FTSE 100 index will push back up towards record highs in the near term.

“The fact that there is still M&A appetite even at these sort of elevated prices gives you an idea that on a corporate and institutional level there’s still significant risk appetite in the market and significant demand for equity assets,” Matt Basi, head of sales trading at CMC Markets.

“It’s to be read as a positive I think in the short term for the wider market.”

Corporate activity newsflow, however, also triggered the biggest falls from an individual stock on the UK benchmark, with AstraZeneca off 2.2 percent after Pfizer walked away from making a formal bid for its smaller British rival.

Societe Generale analyst Stephen McGarry downgraded the stock to “sell” from “hold” on the news, setting a price target of 36 pounds a share.

AstraZeneca went some way to limit gains on the broader FTSE 100, which was up 14.72 points, or 0.2 percent, at 6,830.47 points by 0754 GMT.

The UK equity market, which was closed for a public holiday on Monday, played catch up with a strong rise in European equities on solid election showings for governing parties in Germany and Italy.

Earlier this month it climbed to 6,894.88, the highest level since December 1999, when it set a record peak of 6,950.60 points. Although it has since sold off, with the index having dropped 0.6 percent last week to post its biggest weekly decline in more than a month, technical analysts remain optimistic.

“There is still reluctance among traders to take it through 6,900 at this point. That said, the FTSE looks well supported up here and would probably have to break below 6,750 to alter that impression,” Charles Stanley analyst Bill McNamara, said.

(Reporting by Tricia Wright Editing by Jeremy Gaunt)