Leading UK shares sputtered to a flat close on Monday after a mainly higher session, dragged back by drugs shares ahead of results in the sector this week, although Rolls-Royce bounced on order hopes.
Aero-engine maker Rolls-Royce was the biggest blue chip gainer, rising four percent on news Japan's All Nippon Airways ordered 50 Boeing 7E7 jetliners. Rolls is in the running to supply the engines.
But drugs shares weighed on the index, with GlaxoSmithKline down 1.7 percent and AstraZeneca off 0.7 percent. Both release first-quarter numbers on Thursday, and GSK is expected to report a fall in earnings, hit by generic competition to antidepressant Paxil and a weak dollar.
The FTSE-100 index closed 1.8 points up at 4,571.8, pulling back from a session peak of 4,586.9 after an uncertain start on Wall Street where worries about Iraq resurfaced after fighting between US troops and insurgents near Falluja. Drug stocks alone took about six points off the FTSE.
Hilary Cook, Director of Investment Strategy at Barclays Private clients, said the FTSE was trying to hold onto last week's 33-point gain but worries about Iraq were bound to take their toll on investor sentiment.
"The Dow's not exciting today, but corporate news has been generally OK, and the market's not stunningly cheap. When you've got Iraq overhanging all of this, it's quite difficult to be overly positive," said Cook.
Defence firm BAE Systems climbed two percent to 220 pence after it said at the weekend it had received potential offers for its warship and submarines businesses, which prompted Dresdner Kleinwort Wasserstein to raise its price target to 213 pence from 187p.
Separately, investment bank Credit Suisse First Boston raised its price target on the stock and repeated its "outperform" rating after a meeting with the defence firm.
Mining group Xstrata was another big blue chip gainer. It rose 1.8 percent after news that most contract prices for Australian thermal coal with major Japanese power utilities for 2004/05 had jumped 68 percent on a year earlier.
Steel-maker Corus Group led midcap fallers with a 3.8 percent drop, unsettled by a report that Russian metals magnate Alisher Usmanov would raise his stake in the company to force boardroom changes unless Corus improves its results.
Food and consumer products company Unilever dipped 0.4 percent as dealers said investors pulled back after an eight percent rise this year, prior to quarterly results on Wednesday.
Shares in small-cap biotechnology firm Antisoma lost more than half their value, dropping 24-1/2 pence to 19-1/4p after its leading cancer drug hope failed a clinical trial.
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