Insurance group Aviva is among the leading market fallers after a broker downgrade and speculation of a possible €4bn (£3.2bn) Spanish acquisition.
Its shares have dropped 21.5p to 517.5p as Panmure Gordon cut its full-year estimates and price target, although it maintained its buy rating.
Ahead of the insurer's figures next week, Panmure said: "We have lowered our 2008 and 2009 full-year estimates by 7.5% and 10%, respectively, reflecting slow new business sales and lower returns from existing business. This has the impact of lowering our 12-month target price from 854p to 803p."
On top of that came talk that Aviva was one of the favourites to buy Santander's insurance business, put up for sale following the Spanish bank's bid for Alliance & Leicester. Others said to have been approached by Santander include France's Axa and Germany's Allianz.
Elsewhere the FTSE 100 has managed to gain 18.3 points to 5394.7, with a recovery in the mining sector helping to pull the leading index higher. Ferrexpo, Kazakhmys, Lonmin and BHP Billiton are all up around 4% so far.
John Meyer at Fairfax said: "Mining equities should recover further as we head into the August earnings season. Rio Tinto should announce strong earnings growth led by the aluminium and iron ore divisions. BHP Billiton should also report strong June year-end numbers again led by oil and gas, iron ore, aluminium and copper. Anglo American and Xstrata should also follow with strong numbers. "
Pharmaceuticals, however, are out of favour, not helped by a profit warning from Jordanian drugs group Hikma, down 98.5p to 410.5p.
Satellite communications business Inmarsat is also a major loser, down 34.5p to 478p after talks with its 28% stakeholder, the US hedge fund Harbinger about a takeover seemingly foundered on regulatory worries. Harbinger said it was still interested in buying the company, and was considering whether to pursue the necessary approvals from competition authorities.
Finally, to no one's surprise, the bulk of the HBOS rights issue has been left with the underwriters, who are now scrabbling around to place the shares with willing buyers. HBOS is down 7p at the rights price of 275p.
