Britain's FTSE 100 fell on Monday, led lower by miner Xstrata on concern that its bid for Australian's WMC might be threatened by a rival offer from BHP Billiton and further pressured by GlaxoSmithKline as investors fretted about the financial impact of problems with two of its key drugs. Analysts say GSK's profits will be at least 2 percent lower this year because of manufacturing difficulties with antidepressant Paxil and diabetes medicine Avandamet. US officials seized stocks of both drugs because of quality problems last week. GSK shares lost 1.2 percent.
In the mining sector, BHP Billiton said it might enter the race to buy Australian miner WMC. Xstrata has already offered $6.5 billion for WMC and analysts said BHP's interest could spark a bidding war. Xstrata ended down 3.1 percent and BHP lost 1 percent.
But sweets and soft drinks maker Cadbury Schweppes bounced 2.3 percent after industry data for February showed Cadbury increased its US market share for a fourth straight month, Sanford Bernstein analyst Andrew Wood highlighted in a research note.
"Cadbury's stock has sold off in the last 2 weeks as investors seem to be taking profits from what has been a good performance over the last 18 months. However, we still believe that it is too soon to take profits," Wood added.
Gains for market heavyweights including mobile phone group Vodafone and bank Lloyds TSB also provided some support, but the market still ended lower, leaving the FTSE 100 off 9.1 points at 5,027.2 by the close. Total turnover was just under 2 billion shares.
"The market is struggling a little bit to hold above 5,000 on the FTSE and I think as the year progresses the news flow is not going to help much," said John Smith, investment director at Brown Shipley. "It's not going to be a major problem but I think that we need to see a lot more economic news and a peak in interest rates before people can anticipate better prospects ahead."
Building materials company Hanson was the top blue-chip performer, ending up 2.5 percent as analysts welcomed its 120 million pound purchase of lightweight concrete blocks maker Thermalite.
"It's a bolt-on acquisition. It's seen as reasonably fully-priced, an affordable acquisition. It's good that they're doing something with their cash flow, people are keen to see the business move on," Williams de Broe analyst Simon Brown said.
BAE Systems was another talking point, finishing down 1.7 percent after it agreed to buy US armoured car maker United Defence Industries for $4 billion. The purchase will beef up BAE's land systems business and its foothold in the United States but it had to raise 360 million pounds via a share placing to help fund the deal.
Among mid-cap players, the London Stock Exchange lost nearly 8 percent after Deutsche Boerse bowed to shareholder demand and withdrew a proposed 1.3 billion pound bid. The German stock exchange group said it reserved the right to make a new bid if European rival Euronext, which has been in talks with LSE, or another party announces an offer.
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