Britain's top shares fell for a second day on Wednesday, erasing morning gains following a mixed batch of results from US companies and as publisher Pearson lost ground due to poor trading at its Penguin books unit. But glass maker Pilkington was the latest mid-cap firm to move into the take-over spotlight, and its shares jumped over 15 percent on talk that 20 percent shareholder Nippon Sheet Glass could be casting an eye on the firm.
Pilkington said it was not in discussions about potentially being taken over, however, and its shares fell back to end up 6.6 percent at 125-1/2 pence, valuing it at about 1.6 billion pounds. Dealers said volume of over 34 million shares - more than six times the daily average - showed it remained a bid candidate.
The FTSE-100 share index closed down 5.6 points at 4,818.3 to add to Tuesday's 23-point retreat. But the mid-cap FTSE 250 index rose 0.5 percent to 7,088.8 points, leaving it 80 points short of its all-time high from September 2000.
US shares fell in early trading after results from the banking, drugs and auto sectors, although there were no major surprises. Dealers said US fourth-quarter earnings are expected to show solid growth, but resurgent oil prices and volatile moves by the US dollar are contributing to a wary stock market mood.
"The macroeconomic background looks good, and this week we've got a lot of US earnings announcements, so we'll take our lead from the States," said Adrian Clayton, a fund manager at Christows Stockbrokers. "But we're not seeing too much volume confirming moves, which is symptomatic of the quiet week we've seen."
Pearson sagged 2.8 percent after saying it expected 2004 earnings at the lower end of expectations after a tough holiday season for its Penguin unit, even as its Financial Times newspaper broke even for the first time in two and a half years.
Media company EMAP benefited as investors switched into it from Pearson, sending its shares 3.1 percent higher.
Telecoms stocks endured a rocky day, with mobile giant Vodafone adding 1.1 percent on hopes that a review of new accounting procedures on Thursday could offer clarity and that a trading statement next week will show strong subscriber growth.
Rival mmO2 advanced in early action but ended down 1.2 percent as dealers said it suffered from some investors switching into European operator KPN as almost a third of the Dutch firm's shares were sold.
BT also fell in late action to end down 2.7 percent after the European Commission said it was investigating the fixed-line operator for potentially receiving illegal tax advantages from the British government. BT rejected the suggestions, but it could be forced to reimburse the government.
The Christmas retail confession season continued to produce winners and losers. Magazine and bookseller WH Smith jumped 5.6 percent as a rise in its gross margins more than countered a fall in sales and the company indicated it could be on a path to recovery. "After what we've seen from Smith's in the last couple of years, that was a big relief," one dealer said.
But EMI Group fell 2.4 percent after Credit Suisse First Boston started coverage on the music company with an "underperform" stance, saying it may struggle to deliver expected sales growth due to tough Christmas competition and as margins are hit by higher artists' royalty and marketing costs.
Imperial Tobacco led blue chip fallers with a 3.8 percent retreat as its shares traded without the right to the latest dividend payment. British Land fell 1.9 percent as it too went ex-dividend.
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