The FTSE 100 of Britain's leading shares ended flat on Wednesday as Rio Tinto topped the gainers on bid talk but nerves ahead of rate decisions in the United States and Europe left the market subdued.
Mining group Rio Tinto extended earlier gains to soar over 20 percent just before the close on talk of an imminent bid from bigger rival BHP Billiton.
Rio closed on the day up nearly 11 percent at 3660 pence. A spokesman for Rio Tinto said the share price move was based on speculation, and added that the company had not received a bid and was not aware of any offer from BHP Billiton.
BHP Billiton tacked on 5.4 percent.
Talk swept Australian markets that BHP was readying a hostile bid for Rio after it had rebuffed a friendly offer of A$100-A$110 per share, a premium of up to 23 percent from Tuesday's close, traders and analysts said.
The FTSE 100 ended 0.8 points, or 0.01 percent lower at 6,549.6, with many traders jittery ahead of the US Federal Reserve's interest rate announcement due later in the day and the UK and European central banks' verdicts due on Thursday.
"Despite a solid early start for equities in London with support again emerging off the back of merger news - this time in the mining sector - the FTSE is back in negative territory as lacklustre earnings data, stocks trading ex-dividend and a general desire to book profits served to weigh against early gains," said Jimmy Yates, a trader at CMC Markets.
"Attention remains very much focused on the interest rate verdicts that are due over the next 24 hours and although no change is expected from Washington or Frankfurt, any clues as to where monetary policy will go in the future could be reflected in equities."
All 61 economists in a Reuters poll predict Bank of England policymakers will raise interest rates by 25 basis points to 5.5 percent on Thursday, the fourth such increase since last August.
The consolidation talk boosted the entire mining sector, which accounted for over 31 index points, despite falling base metal prices. Anglo American was up 3.9 percent, Xstrata added 3.3 percent and Vedanta gained 2.5 percent.
In other commodities, London Brent crude, currently seen as more representative of the global market than US prices, fell to around $64 a barrel. Heavyweight oil stocks BP and Royal Dutch Shell both dipped about 1.5 percent after trading ex-dividend, with the oil and gas sector taking 15 points off the FTSE index.
Further on the upside, DSG International, Europe's largest electronic group, added 5.1 percent on ratings upgrades from Morgan Stanley and Berstein Research and speculation about its vulnerability to a buyout.
Imperial Chemical Industries was up 2.2 percent as traders cited expectations that there may be a positive announcement on company debt, and with vague bid talk also buoying the shares.
Old Mutual, Liberty International and Rexam all featured on the losers list after trading ex-dividend. Britain's biggest software firm Sage fell 2.2 percent after it issued an upbeat outlook despite posting first-half results at the lower end of the market forecasts.
Prudential dipped 2.5 percent after Cazenove downgraded the insurer to "in-line" and advised investors to switch to larger UK rival Aviva, saying it saw "no more than an even chance" of a break up of the firm.
In midcaps, low-cost airline easyJet's shares suffered a fourth day of losses, after it said passenger numbers were being hit by higher taxes and interest rates, and as rival Ryanair launched a price promotion.
EasyJet said it had more than halved its traditional first-half loss, meeting analysts' expectations. But its shares fell 5.3 percent, continuing a fall that started last week when rivals Ryanair and British Airways reported soft April trading.