Shares in Legal & General rose more than 5 per cent yesterday amid market speculation that Resolution, Clive Cowdery’s consolidation vehicle, was eyeing up the insurer.

L&G rose 4½p to 85¾p as traders gossiped that Resolution, up 0.15p to 97.15p, may look to break up the business.

The rumour, which comes just a week after Resolution completed the £1.86 billion acquisition of Friends Provident, was that it could bid between 95p and 100p for L&G, with the break-up value of the deal at about 140p.

Although L&G’s shares were clearly more in demand than usual — being the sixth most traded stock in the index yesterday — brokers noted that this is not the first time such a rumour had done the rounds and it is unlikely to be the last.

Interest in L&G, Aviva, up 12p to 408p, and Prudential, up 11½p to 605½p, was also supported by news that European insurance regulators had indicated they could be willing to water down rules about how much capital the industry has to hold.

Gains for the insurance sector helped the FTSE 100 to advance 36.20 points to 5,266.75, after trading for its highest levels in almost a year earlier in the session.

The mining sector made ground after data showed that Chinese factory output hit a 19-month high in October and as the weaker dollar buoyed metals prices. Kazakhmys gained 38p to £12.90 and Rio Tinto rose 75p to £31.18. Randgold Resources was the index’s biggest riser, up 281p to £48.58, bouncing back from downbeat results this week after gold prices hit a new record high.

By contrast, Reed Elsevier was the biggest faller, down 19½p to 465p, and arguably the biggest talking point of the day after the shock resignation of Ian Smith, the publishing and events group’s chief executive, who was appointed only in March. Execution, a broker, said that the news raised more uncertainty about the amount of incremental investments needed to restructure the business.

Vodafone eased 1¾p to 134p and Barclays fell another 2¼p to 323p as both stocks continued to drift lower after recent updates.

Schroders, on the other hand, gained 43p to £12.13 amid broker upgrades prompted by recent figures.

BP fell 9¾p to 583½p and Home Retail Group lost 5p to 304½p as both the oil major and retailer traded without rights to their latest dividend.

British Airways climbed 3½p to 200p after a bullish research note from Evolution Securities, which advised its clients to “buy”, putting a target price of 330p on the airline. Astaire Securities also suggested the carrier could benefit from troubles at bmi, with its smaller rival cutting capacity.

DSG International rose 2¾p to 36½p after Citigroup raised its 2010 pre-tax profit forecast by 51 per cent to £68 billion, citing a more robust UK electricals market and progress at refurbished stores.

National Express fell 7p to 331p after it confirmed plans to raise £360 million in a rights issue, which its largest shareholder is not supporting.

New York: Shares edged up after comments by Federal Reserve officials suggesting that interest rates would stay low for some time. At the close the Dow Jones industrial average was up 44.29 points at 10,291.26.

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