Losses in market heavyweight AstraZeneca after it revealed a one-year delay with a diabetes drug weighed on Britain's top share index on Wednesday, although the fall was countered by stronger oil firms such as BP as crude surged to record highs.
The move halted a three day rally that took the FTSE-100 benchmark index to its highest level in 28 months and left the benchmark down 0.8 points at 4,706.3, but above an earlier low at 4,689.2.
AstraZeneca was the biggest weight on the market, accounting for about 5 points of downside on the leading index, after it announced the delay to Galida for diabetes and said it was unlikely to win US approval any time soon for its anti-clotting drug Exanta, knocking confidence in prospects. It also failed to lift earnings guidance, as some had hoped.
The broader market also took a rise in crude oil past the $51 per barrel largely in its stride, although companies with particular reliance on the commodity, such as British Airways and Dulux paint maker ICI, weakened.
Market heavyweights BP and Shell benefited from the rise. BP outperformed Shell with a 1.4 percent gain, buoyed by news it had discovered significant oil and gas reserves after drilling its first exploration well on a block in Russia's far east region.
"It's good for the overall market because they're such big companies, but going forward you've got the prospect of slowing revenue growth and increased costs pressures," said Darren Winder, UK equity strategist at UBS.
"The downside is limited, but the upside is capped by a lot of macro risk. There's uncertainty over the outlook for the oil price and over the outlook for house prices."
Man Group outstripped other blue-chip risers with a gain of nearly 7 percent as talk resurfaced that a US financial group had approached the company. Both Citigroup and Merrill Lynch have been tipped as possible predators. Man Group declined to comment.
"It's the same talk as yesterday, but it's gathering momentum," one dealer said.
Elsewhere in the sector, fund managers Amvescap and Schroders rose as improving market conditions alleviated concerns over the value of their share portfolios. The sector was also buoyed by hopes for further consolidation in the sector.
Evidence of rising raw materials costs was provided by US auto parts maker Delphi, which warned its third-quarter loss would be far wider than expected and said it foresaw volume and pricing pressures to continue.
The news had a knock-on effect on car parts maker Tomkins, down 1.8 percent, and GKN, off by 2.2 percent. GKN stock also suffered a target price downgrade from Deutsche Bank.
Elsewhere on the downside, catering firm Compass slid 2.9 percent after its French rival Sodexho reported a fall in annual sales and said it was not counting on any revenue increase in Britain.
Among midcap shares, steel firm Corus added 1.9 percent after sources close to ThyssenKrupp said the steelmaker was eyeing a take-over of the Anglo-Dutch company.
But computer distributor Computacenter led mid-caps lower with a 8.8 percent fall after UBS downgraded its rating on the stock to "neutral".
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