Britain's top share index fell in early trade on Thursday, as investors paused for breath after the previous session's gains, with miners leading declines weighed by downbeat Citigroup comments on precious metal miners.
By 0803 GMT, the FTSE 100 was down 4.06 points, or 0.1% at 5,362.35, having closed up 2.7% at 5,366.41 on Wednesday, its strongest daily performance in almost a month buoyed by strong macro data and M&A speculation.
"We are still very much in a trading range," David Morrison, market strategist at GFT Global said, adding investors are keeping an eye on U.S. markets and the S&P in particular, which is at the peak of its recent trading range.
"If it (the S&P) can break through that (the 1,080 level) then we have every chance of pushing on."
Miners, among the best performers on Wednesday after the bullish manufacturing data from China and the U.S., dropped as investors booked profits.
Lonmin and African Barrick Gold were top fallers in the sector, down 1.4 and 2.5%, respectively, as Citigroup cut both their ratings to "hold" from "buy" arguing precious commodities are set for a subdued second-half 2010.
Precious metals peer Fresnillo fell 2.5% and Hochschild Mining shed 2.5% as Citigroup downgraded its recommendation on the mid cap miner to "sell" from "hold".
A broker downgrade also weighed on testing equipment firm Intertek Group, which dropped 1.2% with traders citing a Morgan Stanley note in which the broker cut its rating to "underweight" from "equalweight".
UK Chipmaker Arm Holdings was the top faller on the FTSE 100, down 3.2% with JPMorgan Cazenove arguing that U.S. peer Intel's purchase of Infineon's wireless unit is neutral rather than positive for Arm.
Telecoms firm Cable & Wireless Worldwide and British satellite business Inmarsat fell 1.7 and 0.6%, respectively, paring previous session's gains, having been linked with M&A talk on Wednesday.
AUTONOMY NOT ALONE
M&A talk continued to spark investor interest. Britain's biggest software company Autonomy topped the blue chip risers list, up 3.7% with traders citing press reports that the software company could find itself at the centre of a takeover battle between Microsoft and Oracle.
Mid cap Redrow added 2.6% as speculators remained convinced that founder and chairman of the housebuilder Steve Morgan, who owns 29.9% of the equity, will soon take the company back into private hands at 495 mln pounds, or 160 pence a share, the Daily Mail market report said.
Britain's International Power, which recently agreed to a reverse takeover by France's GDF Suez, rose 1.5% helped by Deutsche Bank which upgraded its rating to "buy" from "hold".
Defence contractor BAE Systems climbed 2.3% after the firm received a $629 mln contract to upgrade 1,700 Caiman MRAP vehicles.
The European Central Bank is set to keep interest rates at a record low of 1%, in a decision to be announced at 1145 GMT.
