A move by renamed mobile phone operator O2 to raise cash via a share placing snuffed out an early rally attempt by Britain's blue-chip shares, leaving the FTSE 100 index in the red by Monday's close. O2, changing its name from mmO2, raised 375 million pounds via the placing of 300 million shares, or around 3.4 percent of capital, which dealers said met solid demand. The shares closed down 0.8 percent.
The placing raised funds for 02 to buy out many of its smaller stockholders as part of a restructuring to streamline the shareholder base it inherited after demerging from former fixed-line parent BT in 2001.
Telecoms as a group accounted for about half of the FTSE 100's closing fall of 7 points to 4,975.0 as the O2 placing lured investors away from Vodafone, down 0.7 percent and Cable & Wireless, off 1.5 percent.
The UK's bellwether index has fallen more than 1 percent in the last week or so, with investors concerned that the powerful rally since the end of last year have run its course due to concerns over the economy, inflation and interest rates.
Tim Rees, director of investment strategy at Insight Investment, said markets could afford to consolidate a little more.
"I don't think there's anything particularly worrying about being around here or even being a little bit lower. Equities have done very well over the last couple of years; they've beaten most other asset classes comfortably," said Rees.
"I'd be wary of being excessively negative unless you argue that the economy has gone so far that consumers are so indebted that they must at some stage stop spending, and then everything unravels," he added.
Traders added that investors were resigning themselves to a period of range-trading and relatively low volume business.
"There's certainly not enough news out there to push the market up, and at the moment there is no tangible bad news to push it down," said one trader at a European house.
Drinks company Allied Domecq, maker of Ballantine's whisky, firmed 1.1 percent on fresh speculation that rivals Diageo and Pernod Ricard could team up to make a bid.
"This Allied Domecq thing just won't go away. The fascinating thing about it is that it's not impossible that they could be bid for and that's why people keep pushing the idea," said a trader.
A trio of retail companies announced changes in finance directors. Marks & Spencer named Ian Dyson as its new finance director, but the arrival of the former Rank Group finance chief failed to lift M&S shares, which were down 1.1 percent.
Food retailer Sainsbury also dipped 0.6 percent after it appointed Darren Shapland as its finance director, while high-street chemist Boots fell 0.8 percent after it said its finance chief had resigned.
Shares in the London Stock Exchange itself fell 3.3 percent to 477 pence after a Euronext shareholder, The Children's Investment Fund, said all major investors in the exchange opposed a bid for the LSE "materially above" 400p per share, according to a weekend report.
Elsewhere among the midcaps Anglo-Danish security services company Group 4 Securicor fell 4.2 percent, despite news of higher profits for 2004. Traders said the share price fall might reflect disappointment with a toned down forecast for US unit Wackenhut.
Service and construction firm Alfred McAlpine shed 3 percent as dealers said UBS cut its rating on the company to "reduce" from "neutral".
Steam and pumping equipment maker Spirax-Sarco was top mid-cap gainer, climbing 5.2 percent after it reported a rise in annual profit and said it expected further growth in 2005.
Floor coverings distributor Headlam Group also made headway, up 4 percent after reporting a jump in annual profit and saying its businesses in the UK and Continental Europe had made a strong start to 2005.
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