Wires

UPDATE 1-UK midcaps at highest since September

Muvija M and Shashwat Awasthi

* FTSE 100 about flat, FTSE 250 up 0.4%

* Aviva steepest decliner on main board

* Pound gains on election hopes

* IQE tanks after results warning

* Buyout offer spurs Consort Medical (Adds company news items, analyst quote, updates share moves)

Nov 18 (Reuters) - British mid-caps scaled a near two-month high on Monday, continuing to benefit from indications of a Tory victory in the upcoming snap election in the country, while a near 4% drop in insurer Aviva weighed on the main board.

The FTSE 100 was little changed by 0920 GMT, after its worst weekly performance in four.

The midcap bourse outshone, rising 0.4%, thanks to gains in the local currency on hopes that the Conservatives would win and deliver Brexit.

A rally in sterling was set off on Friday when Brexit Party candidates stood down from over 40 seats not held by the Conservative Party, which traders saw as a move that would help the Conservatives gain a majority on Dec. 12.

"A Labour win could cause turmoil on the markets given the party wants to renationalise several sectors and shake up taxes," Russ Mould, investment director at AJ Bell, said.

"However, a lot can change in politics in three weeks so the markets are likely to remain volatile right up to the big vote."

The FTSE 100, however, was not able to fully enjoy the cheer in global markets over a report that China and the United States had "constructive talks" on trade as the pound's rise dragged down exporter stocks.

News-driven moves dragged Aviva 3.6% lower after the life and general insurer said it will retain its operations in Singapore and China amid speculation of a sale of the Singapore business.

"The fact that they have not been able to get a bid for it or come to an agreement to sell it would lead you to believe that they were unable to sell it so it isn't worth what they think it is," a trader said.

The company also said it was looking at strategic options for its operations in Vietnam, Indonesia and Hong Kong, where the recent pro-democracy protests have threatened the territory's identity as one of Asia's major financial centres.

London-listed financial stocks with a sizeable exposure to China including HSBC have been hammered amid the protests in recent months.

Among smaller companies, IQE plunged 20% after the tech firm warned on results amid issues with two of its main customers, while Consort Medical sky-rocketed 44% and past the 10.1 pound a share bid from Sweden's Recipharm .

Diploma climbed 4.4% to top the FTSE 250 index after the technical products supplier reported a jump in revenue and profits partly boosted by acquisitions. (Reporting by Muvija M and Shashwat Awasthi in Bengaluru; Editing by Shailesh Kuber)