Britain's top share index fell on Wednesday as nervous investors locked in recent gains before a US interest rate decision due later in the day and as a number of stocks, such as Rexam, traded without the right to the latest dividend payout.
Insurer Old Mutual was the top blue chip faller with a loss of 3.3 percent after its first-quarter sales rose broadly in line with expectations. Some analysts had expected more from the company and dealers said that had translated into slight disappointment in the market.
The news depressed shares in industry peers Royal & Sun Alliance and Aviva but elsewhere in the sector shares in Prudential reversed an earlier loss to close 1.2 percent higher, lifted by fresh speculation that French rival Axa may be eyeing a bid. Both Prudential and Axa declined to comment.
The FTSE 100 share index ended down 22.2 points, or 0.4 percent, at 6,083.4 points, having dipped as low as 6,079.6. Dealers said the mood was cautious ahead of the Federal Reserve's interest rate-setting meeting due at 1815 GMT. The Fed is widely expected to raise overnight rates by 25 basis points for the 16th straight time at its meeting, taking the key rate to 5 percent.
On the domestic interest rate front, the Bank of England tempered expectations that interest rates will rise this year after it said in its quarterly inflation report that hardly any tightening was needed to keep inflation on course to hit its target.
"People have been worrying about rising interest rates and rising bond yields, but I regard both of those as sub-neutral at the moment. And therefore one really shouldn't expect those to act with much of a headwind to equity markets," said Tim Rees, director of investment strategy at Insight Investment.
"I think the market can hold these levels. I, on the other hand, think at some stage you are going to see rotation away from the sectors that have given leadership over the last 2 or 3 years," citing sectors including mining, oil and property.
Antofagasta, Rexam, BP, Royal Dutch Shell and GlaxoSmithKline all traded ex-dividend, contributing an estimated 11.8 points to FTSE 100 downside.
Britain's top electrical retailer DSG International leapt 7 percent after it said it would beat most full-year profit expectations following a stronger second half, despite battling weak demand, heavy competition and sharp deflation.
"Amidst a tough and competitive trading environment, today's strong numbers have pleasantly surprised the market," said Hargreaves Lansdown head of UK equities Richard Hunter. "News at The Link remains a concern, but DSG seems to be well positioned overall, as evidenced earlier in the year by their strong Christmas performance."
DSG's numbers buoyed the broader sector, with Kingfisher up 2.1 percent and Argos stores owner GUS gaining 1.6 percent. Shares in retailer Boots rose 3.9 percent and Alliance Unichem added more than 5 percent after the Competition Appeal Tribunal dismissed a request by Germany's Celesio for another look at the planned merger of the two UK companies. Morgan Stanley raised its investment rating on Boots to "equalweight" from "underweight" following the announcement.
Medical equipment company Smith & Nephew gained 4.6 percent after it said it had received US regulatory approval to sell a new hip implant which conserves more of the patient's bone than a traditional replacement.
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