LONDON (AFX) - The FTSE 100 remained higher midmorning as takeover speculation continued to lend support to shares, with RSA higher on talk of an AXA bid although denials of a counterbid from Deutsche Telekom dented O2, dealers said.
In London, Royal & Sun Alliance remained top of the pile, up 3-1/4 at 103-3/4, after press speculation linked the insurance group with a possible bid from France's AXA. In another development the group said it had reached settlement with Wilmington Trust in the ongoing Student Finance Corp litigation in the US.
Wilmington Trust, one of the three remaining plaintiffs in the litigation, has now agreed to discontinue its part of the legal action, RSA said in a statement.
Elsewhere, Compass Group continued yesterday's strength, gaining 5.5 pence to 195.5, as the takeover frenzy of the past few days drew speculative interest.
Yesterday, stories emerged that private equity firms might be working on a bid. However analysts thought that the ongoing investigation into claims that Compass obtained information on rival bids for a UN contract might put bidders off while others may view it as an opportunity to launch a move.
Financial issues were given a boost after forecast-beating third quarter net income numbers from Credit Suisse. HBOS rallied 17 pence to 861 while Royal Bank of Scotland rose 20 pence to 1595. Barclays was 5 ahead at 612.
Shares in Vodafone were given a boost after ABN Amro reiterated its 'buy' rating and 180 pence target price in an upbeat review of an investor survey.
The broker thought that dissatisfaction over Vodafone's shareholder return policy was the key to why its stock traded so far below its estimated fair value compared to its peers. Vodafone shares were 2 ahead at 151-1/2.
Continuing the recent merger fever, shares in BG continued to gain, up 5 at 522, following speculation Royal Dutch Shell is mulling a bid for the group.
ICI eased off highs, but remained 0-3/4 firmer at 289-3/4 ahead of its third quarter update tomorrow. Sentiment was also boosted by German chemicals giant BASF lifting its guidance for full-year earnings before interest and taxation alongside third-quarter results that came in ahead of consensus.
The company's third quarter operating profit before special items rose 13 pct to 1.327 bln eur compared to 1.172 bln the year earlier, beating consensus forecasts of 1.283 bln.
Utilities dipped reflecting a downturn in European government bonds as the buying interest since the start of the week faded away after another flurry of stronger than expected economic indicators.
In data out this morning, euro zone manufacturing purchasing managers' index rose to a 13-month high of 52.7 in Oct from 51.7 the previous month -- indicating that growth in the sector is picking up.
A plethora of heavyweights were also lower as they turned ex-dividend. Those trading without the right to a dividend were GlaxoSmithKlein, Boots, William Hill and Whitbread.
Among the mid-cap risers, aviation services firm BBA gained 23 at 314 after it confirmed plans to spin off its materials technology division Fiberweb and said it is considering various options, including a demerger and sale.
The German broker initiated coverage in the four largest UK producers with 'buy' recommendations for George Wimpey, up 16-3/4 at 434, and Taylor Woodrow, up 12-1/4 at 333.
Pretax profit for the third quarter ended Sept 30 rose 151 pct to 45.5 mln usd from 18.1 mln a year earlier, while revenue rose 109 pct to 162.5 mln usd, from 77.7 mln.
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