SHARES in fashion house Burberry soared on the London market amid mounting speculation over a merger with a US rival.
Burberry closed up more than three per cent, or 45p, to 1,495p after financial blog Betaville said US luxury bag maker Coach was working with investment bank Evercore to thrash out a deal for the firm.
However, the FTSE 100 Index struggled to make headway but remained above the psychologically important 7,000 mark, closing down 6.43 points to 7,020.47.
London's top flight had been buoyed by tobacco stocks early in the session after British American Tobacco (BAT) announced a $47 billion (£38.3 billion) merger with US tobacco firm Reynolds.
The deal would create the world's largest listed tobacco company and bring together brands such as Dunhill, Lucky Strike, Rothmans, Kool and Kent with Doral, Misty and Capri slims.
BAT currently owns 42.2 per cent of Reynolds and the proposal involves the acquisition of the remaining 57.8 per cent of the company.
The FTSE 100 firm rose 2.3 per cent on Friday morning before finishing the session as the biggest faller after investors soured to the deal.
Shares in BAT closed down 137p to 4,666p while Imperial Brands closed up 103.5p to 3,965.5p.
Across Europe, Germany's Dax was marginally higher and the Cac 40 in France fell 0.1 per cent.
Brent crude was up 0.4 per cent to $51.59 (£42.21) a barrel as oil prices were supported by Russia's commitment to help Opec curb output.
On the currency markets, the pound was down 0.3 per cent against the US dollar at $1.221 after French president Francois Hollande said negotiations would be difficult for Prime Minister Theresa May if she opts for a "hard Brexit" by leaving the European single market.
Sterling was also under pressure after the Government surprised economists by racking up higher-than-expected borrowing figures for September.
The Office for National Statistics (ONS) said public-sector net borrowing, excluding state-owned banks, jumped 14.5 per cent to £10.6 billion last month, compared with September 2015.
However, the pound was up 0.3 per cent against the euro at €1.124.
In UK stocks, Holiday Inn-owner Intercontinental Hotels Group (IHG) saw its shares slump after a slowdown in European and American bookings knocked revenue growth.
The company said revenue per available room, which is the sector's preferred measure, grew 1.3 per cent in the third quarter, compared to 2.5 per cent over the previous quarter.
A number of IHG's American hotels are concentrated in oil-producing markets, which have been impacted by the slide in oil prices.
Revenue per available room fell 7.3 per cent in those markets, compared to 2.5 per cent growth in the rest of the region.
Hargreaves Lansdown equity analyst Nicholas Hyett said: ''There's nothing inherently ugly in today's results, they're just a little disappointing."
Shares in IHG were down more than two per cent, or 65p, to 3,160p.
The biggest risers on the FTSE 100 Index were Burberry Group up 45p to 1,495p, Mediclinic International up 26p to 919p, Anglo American up 30p to 1,094p and Imperial Brands up 103.5p to 3,965.5p.
The biggest fallers on the FTSE 100 Index were British American Tobacco down 137p to 4,666p, HIKMA Pharmaceuticals down 55p to 1,907p, Intercontinental Hotels Group down 65p to 3,160p and easyJet down 16p to 918.5p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here