Britain's FTSE 100 index closed down for a second straight session on Wednesday as selling continued on interest-rate worries, but firm drug shares cushioned losses.
A big part of an early 1 percent fall in the FTSE 100 was down to a batch of blue chips such as bank Lloyds TSB trading without the right to the latest dividend, although fresh talk about possible sector consolidation pushed up the drug shares, with AstraZeneca mentioned again as a possible bid target.
Astra shares closed 2.6 percent higher, also lifted by speculation its anti-cholesterol drug Crestor could get a boost from new clinical trial data next week. Other drug shares were firm, with GlaxoSmithKline up 1.9 percent.
Astra shares were strong last month on speculation Swiss rival Novartis might be interested in a bid.
"There are more rumours about AstraZeneca being bid for. In Europe there's seen to be only one take-over target, AstraZeneca, and that's down to the size of it relative to the peers," said a trader.
The FTSE 100 index closed 44.5 points down at 5,812.9, making a two-day fall of nearly 85 points, bringing the index back from near 5-year highs above 5,900 points briefly touched on Monday. At one point on Wednesday it dipped to 5,790.
While about 21 points of Wednesday's fall was due to ex-dividend quotations market watchers said concerns over global interest rates persisted.
"Bond markets seem to have decided that perhaps there is a bit too much growth, not so much that they're fearful of a big break up in inflation ... but that central banks are going to keep chipping away at the foundations of cheap money," said Andrew Bell, European Strategist at fund managers Rensburg Sheppards.
"The prevailing mood is that we've just spent six months discounting quite a lot of good news, maybe we've got to take notice of some of the bad news and when you do that the red ink starts to appear," he added.
Of the shares trading ex-dividend, Lloyds TSB fell 4 percent, housebuilder Persimmon shed 4.9 percent, miner Anglo American lost 2.9 percent and Royal Bank of Scotland traded 2.8 percent lower.
Mining stocks, which had contributed much to UK equity weakness on Tuesday, continued their slide with Kazakhmys and BHP Billiton falling as much as 3.6 percent as base metals prices buckled.
"There has been a bit of profit in the underlying commodities so there is plenty of room to take a nice profit there," said a trader.
Oil shares were steady, despite news of a surprising rise in US crude stocks, underpinned by data showing a dip in refinery utilisation and a rise in gasoline and distillate demand.
"The data seems to be more about a slackening in processing than a slackening in demand," said a trader. BP shares were up 0.1 percent and Royal Dutch Shell 0.8 percent.
Britain's top commercial broadcaster ITV jumped 2.9 percent after reporting a 36 percent rise in annual pretax profit.
"ITV posted a good set of numbers despite lower revenues from advertising," said David Buik at Cantor Index. "300 million pounds is going back to shareholders, there will be a new channel and the pension deficit has been halved."
Among the midcaps, building materials firm Travis Perkins bounced 7.2 percent after it said signs of an improvement in trading meant it expected to return to profit growth in the second half of 2006.
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