Fresh takeover talk surrounding Allied Domecq failed to keep the FTSE 100 Index in the black today.
The Footsie surrendered earlier gains to end the session 2.4 points off at 5041.8.
Allied shares finished the day at the top of the Footsie risers as investors assessed the probability of a joint bid by French group Pernod Ricard and the US owner of Jim Beam bourbon.
However, downbeat economic data showing input prices rising at the highest level for more than four years helped limit gains in London.
Even though manufacturers were largely shielding customers from the hike in raw material costs, analysts said the data raised the prospect of higher interest rates later in the year.
Takeover activity was also keeping investors busy in New York, where telecoms group Verizon Communications agreed to buy the renamed former WorldCom group MCI for $6.7bn (£3.5bn/€5.2bn).
However, that failed to boost the Dow Jones Industrial Average, which stood 12 points adrift shortly after London’s close.
Back in the City, Guinness owner Diageo benefited from the flurry of interest in Allied shares as investors speculated on whether it would try to cherry pick its rival’s wine portfolio.
While Allied added 2% or 11.5p to 533p, Diageo strengthened 4.5p to 743p ahead of its half-year results on Thursday, which are expected to show underlying revenues growth of 6% after stripping out the impact of currency swings.
Catering giant Compass rose 3p to 263p after a trading update reassured investors it was continuing to win contracts and that like-for-like revenues were on course to rise by at least 6% in the current year.
ICI extended its recent rally, rising 3p to 278p and its highest level since the summer of 2002, after broker CSFB raised its target price for the chemicals-to-paints group.
Among other developments, a new property joint venture involving BAA and Morley Fund Managers sent shares in the airports operator up 3.5p to 636p.
Takeover activity was brisk outside the FTSE 100 Index, with online auctioneer QXL Ricardo jumping 27% or 232.5p to 1077.5p after a consortium featuring senior management formally raised their offer for the company.
TalkSPORT owner The Wireless Group moved 3% higher or 2.5p to 92.5p on confirmation that it was studying a takeover proposal involving chief executive Kelvin MacKenzie and other senior bosses.
And shares in Highbury House Communications climbed 0.13p to 9.5p after it accepted a £96.5m (€140.6m) takeover offer from Future, formerly known as Future Network. Future investors were less impressed as its shares fell 2% or 1.5p at 81.75p.
Elsewhere, British Energy shares were under pressure following the nuclear generator’s first set of quarterly results since its restructuring. The third-quarter losses of £87m (€126.7m) were worse than expected following problems at some of the company’s sites. Shares fell 6.25p to 248.75p.
The day’s biggest Footsie winners were Allied Domecq, up 11.5p to 533p, Rexam lifting 9p to 454.25p, Reckitt Benckiser adding 26p to 1635p and GlaxoSmithKline picking up 20p to 1259p.
The biggest losers were Cairn Energy, off 28p at 1116p, Hilton Group down 6p to 318.5p, Kingfisher losing 4.75p to 300p and Shire Pharmaceuticals shedding 7p to 573p.