Britain's top share index ended weaker on Tuesday as fears swirled over exposure to equities in the face of rising global interest rates, although service companies including Rentokil and Davis Service Group gained after a bid for a Danish rival sparked hopes for sector consolidation. Take-over speculation also helped support shares in brewer Scottish & Newcastle and Asia-focused bank Standard Chartered.
The FTSE 100 share index ended down 3.5 points at 4,919.0, well off an earlier low at 4892.8 as Wall Street edged higher but still pressured by losses across the heavyweight and actively traded drugs, telecoms and mining sectors.
Dealers said investors continued to fret about exposure to equities following the Federal Reserve's latest rate hike and were waiting on a string of data releases - including key US labour statistics - for further clues on how aggressive future rate tightening might be.
"It really feels as if the market is lacking direction," said Lawrence Peterman, investment director at brokerage Eden Group. "We need a lead from New York."
Anglo-Dutch steelmaker Corus was among the biggest blue chip fallers, shedding 1.8 percent to track weakness in Asian metals stocks, dealers said.
Shares in the London Stock Exchange fell after the Office of Fair Trading referred two rival bid proposals for the bourse operator to the Competition Commission, which quashed hopes for a swift resolution of the take-over battle.
Shares in LSE, which has been the subject of a tussle between Deutsche Boerse and Euronext, fell 4.6 percent to 452-1/4 pence. Its shares had been trading at around 430 pence before Deutsche Boerse first announced its bid in December.
Euronext has not yet made a cash bid, and Deutsche Boerse withdrew its offer earlier this month but asked the OFT to continue its probe, saying it might make a fresh offer if Euronext or another party unveiled a firm bid.
Elsewhere on the merger and acquisition trail, shares in Rentokil jumped more than 3 percent on news of a bid for rival ISS of Denmark. Other players including Capita and mid-cap listed firms Group4Securicor and PHS notched up gains.
Scottish & Newcastle also featured with a 1.9 percent increase after its Russian subsidiary Baltika reported a jump in profits.
"Russia is about 20-25 percent of Scottish & Newcastle's profits roughly, and selling beer in Russia is extremely profitable," said analyst Nigel Popham at Teather & Greenwood.
Dealers also reported renewed speculation that major rivals such as SABMiller, Heineken or InBev may launch a bid for S&N.
Standard Chartered rose as speculation heated up that banks are interested in a stake owned by the Khoo family, following the death of tycoon Khoo Teck Puat last year.
Elsewhere among blue chip stocks, sugar producer Tate & Lyle rose 1.7 percent after confirming that trading overall continued to be good.
Utility Centrica gained 2.1 percent after investment bank UBS upgraded its stance on the shares to "buy".