The FTSE 100 fell yesterday as hopes of a bid for Rentokil waned and investors sold British Airways stock after a downbeat broker note, although miner Antofagasta was in demand amid take-over speculation.
Traders said the Chilean copper miner was more likely to be bid for following the death of its majority owner Andronico Luksic last week.
"The fact he's no longer around does make the group vulnerable and it would be a choice asset," one dealer said as the shares rose 2.8 per cent.
But sentiment in much of the rest of the market was downbeat, leaving the FTSE 100 19.5 points lower at 5,295.9 by 1043 GMT. Oils accounted for eight points of the fall but dealers said moves were exaggerated in a thin market.
Volume totalled just 576 million shares compared with more normal turnover of about a billion shares by midday.
"If it comes back too far I think there are buyers. There's still cash around and plenty of M&A talk," said Mark McCutcheon, head of dealing at brokers Gerrard, although he was downbeat on Rentokil.
Shares in the pest control and security services group were down two per cent, taking back some of Monday's 10 per cent leap when Raphoe Management, a firm set up by businessman Gerry Robinson, said it might lead a take-over bid for Rentokil.
"We're not convinced about the Rentokil story. Even if he comes in, I don't think there's much upside so there's risk to the downside. There's not going to be a full bid for cash at 180p plus so there's not much upside to it," Mr McCutcheon said.
Airline British Airways was also a heavy faller, off 1.6 per cent after Smith Barney analysts said BA's operating result for the year could fall by £40 million because of wildcat strikes earlier in August.
"The earnings impact could be up to £35 million higher still, should EU denied-boarding compensation rules apply," a research note added.
Housebuilders were in focus on the mid-cap index, with Persimmon up 1.9 per cent after it reported record interim profits and said confidence was improving among house buyers. Sector peers Bovis and Barratt Developments rose 1.7 per cent and 1.4 per cent.