THE prospect of another round of merger deals in the drinks industry failed to drag the FTSE 100 Index into positive territory.

London's top flight joined other European markets on the back foot after China posted its weakest month of industrial production growth since the financial crisis and the OECD downgraded its output forecasts in the face of the eurozone's continued struggle to fight off the threat of deflation.

The FTSE 100 Index was just 2.8 points lower at 6804.2, with BP among heavyweight stocks under pressure after a drop of 1.9p to 468.3p while Apple chip designer ARM Holdings was off 16.5p at 938p.

The biggest event of the week for the London market will be Thursday's independence referendum but after another weekend of inconclusive opinion polls the pound held firm against the US dollar at 1.62. Sterling was little changed against the euro, at 1.25.

SABMiller, which makes Pilsner Urquell and Grolsch, jumped almost 10 per cent - up 334.5p to 3740p - after it reopened takeover speculation in the drinks sector by making an unsuccessful approach for Heineken. The owner of Strongbow and Kronenbourg 1664 said its founding family was determined to keep the Dutch firm's independent status.

However, SAB's interest was taken as a sign that it is bolstering its own defences against a possible £75 billion bid from Stella Artois firm Anheuser-Busch InBev, which is reported to be talking to banks about financing.

Guinness and Smirnoff brewer Diageo was 40.5p higher at 1853p amid wider consolidation hopes in the sector.

Elsewhere, shares in Dixons Carphone were two per cent higher after rival Phones 4u was forced into administration following network operator EE's decision to cut ties with the chain, which has 550 shops.

Shares surged 7.7p to 379.9p as Investec Securities said there was an opportunity for Dixons to capture market share as customers roll off agreements and switch from Phones 4u.

And pasty shop business Greggs surged more than 12 per cent or 66p to 602p after it revealed a "material" boost to expectations for full-year profits following a 5.4 per cent jump in like-for-like sales for the 11 weeks to last weekend. It said it had benefited from demand for its new low-fat sandwich range and improved coffee blend.

Back in the top flight, TUI Travel rose almost 5.6p to 365.7p after the company behind the holiday brands First Choice and Thomson agreed a merger with its German parent company.

Also among the biggest risers on the FTSE 100 Index were Pearson up 28p at 1206p.

The biggest fallers were Sports Direct International down 22.5p at 690p, easyJet down 35p at 1360p, Babcock International Group down 25p at 1040p and CRH down 33p at 1449p.