Britain's blue chip index ended down 0.5 percent on Tuesday as falling US crude weighed on oil shares, while SABMiller rose on reports that Belgian rival Inbev was eyeing the brewer. The FTSE 100 fell 28.8 points to 6,058.5, in thin trading following the public holiday on Monday.
"The market was all over the place, it was up in the morning and now it's down, with not much help from Wall Street," said Mike Lenhoff, chief strategist at Brewin Dolphin. "I thought after the sell-off last week, we would see the market a little oversold, but it seems it is not, and this suggests to me that we could see a little bit more downside."
SABMiller rose 6.9 percent to top the FTSE 100 leaderboard after a report in the Financial Times over the weekend said Inbev was not only working on a $46 billion bid for Anheuser-Busch, but was also interested in pursuing SAB should a bid for Anheuser fail.
Heavyweight oil shares headed south as crude fell to about $130 a barrel after a stronger US dollar helped pull prices down from peaks hit when rebels attacked Nigerian oil facilities. Cairn Energy, BP and Shell were down 0.5-2.1 percent.
British Airways and easyJet rose 3.3-4 percent on relief over the oil price. Also on the upside, mortgage bank Alliance & Leicester climbed 2.6 percent on continued speculation of take-over interest from Lloyds TSB. Lloyds was down 0.4 percent. Exane BNP Paribas analysts said in a note last week that Lloyds could be contemplating "the possible attractions" of a bid for A&L, but said the motivation behind such a take-over move would be "financial rather than strategic".
Heavyweight Vodafone reversed earlier gains to trade 1.7 percent lower, after one of its units agreed to pay 7.72 billion riyals ($2.12 billion) for Qatar's second mobile phone licence, the Gulf state's telecom regulator said. Vodafone shares rose in earlier in the day after it met expectations with its outlook for 2009 and full-year earnings, and said its chief executive Arun Sarin was to leave.
Further on the downside, shares in Imperial Tobacco shed 3 percent as traders and analysts pointed to weekend newspaper reports that the British health minister would publish a report in the coming days with the purpose of limiting the marketing of tobacco. GlaxoSmithKline lost 1.5 percent as Morgan Stanley lowered its recommendation to "underweight", citing concerns over the drugmaker's Cervarix cancer vaccine.
On the leaderboard, Johnson Matthey rose 2.5 percent after Merrill Lynch raised its stance on the stock to "buy" from "neutral". Compass Group was up 3.2 percent after Credit Suisse raised its price target to 425 pence from 415 pence with an "outperform" rating.
Miners were mixed as metal and energy prices fell, with Xstrata down 1.2 percent, Rio Tinto down 1.9 percent and Lonmin 2.2 percent higher. "We could see the directionless start to the week continue as a lack of economic and corporate data may leave the market undecided," said one London trader.
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