By Kit Rees and Helen Reid
LONDON (Reuters) - A spate of dealmaking and strong financial stocks were outweighed by anxiety over the Syrian conflict and a rising pound on Thursday, keeping Britain's FTSE 100 flat.
Britain's leading stock index (FTSE) ended the day up 0.02 percent at 7,258.34 points, lagging European indices which gained in a recovery rally as some saw an easing of tensions over possible U.S. military action in Syria.
"You've got the trade concerns on one side ... and you've got the threat of a military conflict in Syria, so while that's top of the agenda it's hard so see how the market can pave a road to recovery," Jasper Lawler, head of research at London Capital Group, said.
Dealmaking drove big moves on the FTSE which was likely left out of Europe's relief rally due to the strength of sterling, which soared to a nine-month high against the euro.
Micro Focus (L:MCRO) jumped 7.6 percent to the top of the index after a Bloomberg report that Elliott Management had taken a stake in the software firm. Neither company commented on the report.
Pharma group Shire (L:SHP) rose 2.7 percent after sources told Reuters that Japan's Takeda (T:4502) has sounded out its major creditors for a loan as it moves towards a bid for the London-listed rare-disease specialist.
"Healthcare in itself is going through an on-going period of assets swaps and consolidation. The UK houses some of the biggest pharma companies out there, so naturally it's going to be involved," London Capital Group's Lawler said.
Shares in British Airways owner IAG (L:ICAG) fell 1.1 percent after the airline said it was considering making an offer for low-cost carrier Norwegian (OL:NWC).
Norwegian's shares, which are the most-shorted among European airlines, rose 47 percent on the bid news.
Among mid-caps, shares in British bus and rail operator FirstGroup (L:FGP) rose 8.2 percent after a takeover offer from U.S. private equity firm Apollo Global Management (N:APO).
Playtech (L:PTEC) was up 8.5 percent after it bought a stake in Italian betting and gaming firm Snaitech (MI:SNAI) for 846 million euros ($1 billion).
Some well-received earnings updates also added fuel to British mid-caps.
Greene King (L:GNK) rallied 13.6 percent after the pub operator kept its profit guidance, despite the past weeks' bad weather impacting its trading.
Shares in retailer Dunelm (L:DNLM) rose 8.8 percent after it reported a jump in third-quarter online sales which boosted revenue growth.
At the other end of the spectrum small-cap Carpetright's (L:CPRC) shares sank 9.4 percent after the flooring retailer said it planned to close 92 stores and reduce rents at 113 of its sites in a restructuring effort.
British retailers have come under pressure as they have grappled with online shopping at a time when consumers are cutting back on spending due to a rise in inflation.
Stocks going ex-dividend, including Reckitt Benckiser (L:RB), ITV (L:ITV) and Paddy Power Betfair (L:PPB), also weighed on the market.