FRIENDS Life was the top riser in the FTSE 100 Index after investors cheered the disclosure of a possible merger with Aviva.
Shares rose almost six per cent in a session when the wider FTSE 100 Index struggled for direction, falling 21 points lower to 6729.8, despite positive sentiment in European markets amid continued cheer over a cut in Chinese interest rates.
Oilfield services firm Petrofac dragged on the top-flight after a profits warning knocked more than a quarter off its market value.
Meanwhile, sterling, which has been falling against the greenback since the summer, recovered by a cent to just under 1.57 US dollars but was little changed against the single currency at just above 1.26 euros.
France's Cac and Germany's Dax both made gains, while in New York the Dow Jones Industrial Average was flat at the close in London.
In equities, investors were given the first chance to digest the Friends Life deal, announced at the end of last week, putting a £5.5 billion value on the pensions, investments and insurance firm - which said it would recommend it to shareholders.
Tony Cross, market analyst at Trustnet Direct, said: "The target appears to be willing to roll over already suggesting that the offer is a shade too generous and Aviva has seen its shares fall back as a result, while Friends Life is very much in favour."
Shares in the smaller firm were the biggest riser in the top flight up 20.5p at 368.2p with the all-share offer valuing it at 398.9p, a 15 per cent premium to its value at the close last Friday - while Aviva dipped more than five per cent, or 29p, to 510p. Meanwhile, investors cheered the disclosure that telecoms giant BT was in "highly preliminary" talks with O2 and another operator, understood to be EE, to buy a UK mobile network. Shares rose almost four per cent, or 14.1p, to 394.1p.
FirstGroup saw its shares fall almost 10 per cent, down 11.6p to 108.2p on speculation it has lost out on the east coast rail franchise. Stagecoach was down 5.7p, or 1.55 per cent, to 362.4p as bids from Eurostar and Keolis were reported to be the front runners for the contract.
Petrofac headed sharply lower after its net profit expectation for 2015 of $500 million (£320m) came in well short of market expectations. Shares dropped 26 per cent.
In the FTSE 250 Index, meat producer Cranswick announced a six per cent dividend hike as it published interim results - with adjusted pre-tax profits up 11 per cent to £25.8m. Shares lifted 69p to 1404p.
The biggest risers in the FTSE 100 Index were Friends Life up 20.5p at 368.2p, Smith & Nephew up 48p at 1138p, BT up 14.1p at 394.1p and London Stock Exchange up 69p at 2172p.
The biggest fallers in the FTSE 100 Index were Petrofac down 315.5p at 877.5p, Aviva down 29p at 510p, Hargreaves Lansdown down 53.5p at 958.5p and Sainsbury's down 7.4p at 252.3p.
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