London stays in the black over Aviva takeover talk

The interest from More Than insurer RSA – thought to value the business at around 5bn – was immediately rejected by the Aviva board and no discussions are currently taking place, according to reports.

This did not stop investors piling into Aviva shares on the possibility of consolidation in the sector, while the wider FTSE 100 Index also closed the week in positive territory with a 9.38 point rise to 5275.44.

But the Dow Jones Industrial Average in America slipped into the red as persistent worries over the health of the global economy offset better news in Europe and the US.

US retail sales rose 0.4 per cent in July – an improvement after two months of sales declines, although slightly below economist forecasts for a gain of 0.5 per cent.

There was also some better news on US consumer sentiment, with the latest figures coming in above expectations, although this failed to soothe investor nerves after the Federal Reserve's gloomy economic assessment earlier this week.

US retail sales rebounded in July but showed hints of lingering economic softness, as did inflation data showing underlying price pressures stuck at their lowest level since the 1960s.

The reports yesterday offer the latest evidence that the economy has slowed considerably in recent months, but were sufficiently firm to dispel, for now, fears of a renewed downturn.

Consumer sentiment appeared to have stabilised in August following a sharp drop in July, while business inventories rose more than analysts had been expecting.

In London, stocks were given some added support after Germany posted better-than-expected GDP growth of 2.2 per cent during a very strong second quarter for exports.

The performance offered some reassurance for investors in the UK, which will need to see an improved eurozone in order to stimulate its own exports.

However, the euro weakened as markets focused on wider eurozone

concerns, helping sterling surge to a six-week high at 1.22 euros.

Among stocks, top riser Aviva was up 201/8p to 3873/8p.

TUI Travel was another strong riser after Goldman Sachs upgraded the stock to buy and did the same for holiday firm rival Thomas Cook.

Despite profit warnings from the pair earlier in the week, Goldman said the valuations of the companies were compelling and noted that winter bookings were proving resilient. It added that factors affecting trade this summer were unlikely to be repeated next year.

TUI shares rose 85/8p to 2011/4p, and Thomas Cook ended up 3/8p higher at 1767/8p.

Other blue-chip risers included Legal & General, which added 27/8p to 903/4p on the back of the insurance consolidation talk.

However, the prospect of a City fundraising for the possible 5bn spending spree by RSA caused its shares to fall 11/8p to stand at 1273/8p.

The biggest fall in the FTSE 100 came from Vedanta Resources, which dropped 6 per cent – down 128p to 2053p – as it closed in on a majority stake in Cairn India.

There were also further losses for Manganese Bronze after the London black cab maker said that its Chinese joint venture partner had pulled out of its financing plans that would have seen it take a controlling stake in the group.

Shares plunged 11 per cent on Thursday and were down by another 17 per cent, or 81/2p to 371/2p, yesterday.

The biggest Footsie risers were Aviva and TUI Travel.