The shares leapt 7%, or 11.4p, higher to 180p, but the FTSE-100 index reversed earlier gains to close down 4.31 points at 6427.64 having finished Tuesday at its highest level in five years.
The Newbury-based mobile phone giant, which holds 45% of America's largest network, has reportedly held talks with majority owner Verizon Communications over a full merger of the two companies.
Vodafone's value jumped £6 billion to more than £88bn following yesterday's rally. Verizon is worth £90bn, which would make a merger of the two firms the biggest in history.
On Wall Street, the Dow Jones industrial average added to Tuesday's all-time high after encouraging jobs and factory orders data, rising by more than 30 points to more than 14,280 in early session trading.
The increased appetite for risk has also been boosted by confidence that central banks will continue with measures to boost economic activity.
Sterling continued to suffer in the currency markets ahead of the Bank of England interest rates meeting amid expectations the decision will be close after Bank Governor Sir Mervyn King was one of three policymakers that wanted to add another £25bn to its asset purchase programme last month.
The pound was down against the US dollar and the euro at 1.51 and 1.16 respectively.
Car insurer Admiral joined Vodafone on London's top-flight risers' board after it reported a better-than-expected 15% rise in full-year profits to £345 million and increased its dividend for the year by 20%.
Chief executive Henry Engelhardt was upbeat about prospects, saying he believes the next 20 years will make the first 20 "seem downright pedestrian" for Admiral. The shares were 67p higher at 1334p.
There was also a positive reception for Legal & General, which climbed 3.3p to 166p after increasing its dividend by 20% in the wake of full-year results.
Imperial Tobacco shares were off 58p to 2385p amid speculation that the UK Government is planning to copy Australia with the introduction of plain packaging on tobacco products.
And Royal Bank of Scotland shares were down 3.7p to 309.1p after Sir Mervyn called for the lender to be broken up into "good" and "bad" banks.