Isco has been key to Malaga's progress in the Champions League this season. Reuters

Arsenal are currently outsiders in the chase for highly-rated Crystal Palace winger Wilfried Zaha, according to The report states that Liverpool and Manchester City are heading the queue to sign the 19-year-old and have already made inquiries with his Championship club.

It had earlier been reported in the Daily Mail that the Gunners had sent representatives to watch the England Under-21 international in action at the weekend. Arsenal are believed to be lining up Zaha as a potential replacement for unsettled Theo Walcott.

Zaha has scored two goals in each of Palace’s past two games and is thought to be valued at £12 million.

Arsenal were also linked with an audacious move for Atletico Madrid striker Radamel Falcao earlier in the week. While manager Arsene Wenger is said to be getting a £35 million windfall to spend from the club’s latest profits, the prolific Colombian still appears to be considerably out of Arsenal’s price range.

Falcao, who has been strongly linked with both Chelsea and Manchester City, has a €60 million (£48.3m) buyout clause in his contract and Atletico have suggested that it would take an offer of that amount for them to sell.

“€60 million for Falcao would solve all the economic problems at Atletico," general manager Gil Marin said, according to Sky Sports.

"I can say for sure, though, that he will stay with us until the end of the season. Not only will he stay, but so will all the players that the coach wants to stay.

"We will fight to perform a miracle which is what we are doing with what we have available.

"In Europe there are 50 clubs with more income than we have. If we were to sell Falcao for €60 million then that would cover our debts."

In other recent speculation, Arsenal have been listed as one of a number of Premier League clubs interested in Malaga attacking midfielder Isco. The 20-year-old has impressed this season, notably in scoring two spectacular goals against Zenit St Petersburg in the Champions League.

Earlier in the week, Malaga claimed that they wanted to keep the player but would have no choice but to sell if his £17 million buyout clause is met. However, the Spain Under-21 international has said that he is not currently looking for a move away.

“Malaga is on everyone's mouth now because of great displays in the Champions League,” Isco said, according to Metro.

“Besides, I have had two good performances and that's why my name has been heard more than anyone. I just have my mind in Malaga.”

Arsenal’s transfer funds could be boosted, with reports that right-back Bacary Sagna is interesting Inter Milan. The latest speculation about Sagna’s future comes from TalkSport, citing reports in Italy.

The France international earned a sharp response from manager Arsene Wenger after he criticized the summer sales of Robin van Persie and Alex song. While he is set to return from a broken leg later this month, he may also find his place under threat from Carl Jenkinson, who has impressed in the 29-year-old’s absence.