Speciality chemicals group Johnson Matthey bucked a downward trend in the market today, jumping 10% on bid speculation.
Traders were talking of a possible £20 a share takeover, which would value the business at more than £4bn. One name in the frame was said to be Praxair, a US gases and materials business.
Johnson's shares ended 166p higher at £18.40.
Overall though, leading shares fell back sharply after an early attempt to set a new seven-year high.
Traders reported some nervousness ahead of key UK inflation figures tomorrow and the Bank of England's minutes, due on Wednesday, of its last interest rate meeting, not to mention the G7 meeting later this week. But the fall really started to accelerate as Wall Street moved lower after poor third-quarter numbers from Citigroup, which bore the scars of the credit crunch. News that Citigroup and other banks were setting up a fund to support the struggling asset-backed commercial paper market failed to ease concerns that the problems were far from over.
So by the close the FTSE 100 was down 86.2 points at 6644.5.
"After last week's bumper performance, the market was either going to push on towards a new all-time high or fall back on profit-taking," said one trader. In the event, it was the latter.
Among the few risers in the leading index were the oil companies, with the crude price hitting new highs. In London Brent added more than $1 a barrel to nearly $82, while US crude held firmly above $84.
So BP added 3.5p to 622.5p, helped by more positive comment after last week's restructuring announcement. Analysts at HSBC maintained an overweight rating on the shares, although they edged down their price target from 680p to 675p. "We believe the third quarter should prove to be the low point for BP operationally. Over the next 15 months, we expect the start up of several key oil fields and the return to full action of BP's two US refineries to lead to an improvement in sentiment."
Meanwhile Citigroup has increased its price target on BP from 593.5p to 600p and on Royal Dutch Shell from £20.34 to £21. Shell was 11p better at £20.56.
But Tullow Oil reversed earlier gains, falling 2p to 625.5p as it issued an update ahead of an analysts trip to its operations in Uganda.
Energy group BG - tipped as a takeover target for one of the large oil groups or a miner like Rio Tinto - slipped 1p to 895p on profit taking. The company has agreed to sell five exploration permits in the Italian Po Valley onshore gas basin to Petroceltic International, down 0.12p to 9.5p.
Killik & Co issued a buy recommendation on BG, saying: "We believe [it] has the one of the best production growth profiles of the European majors alongside StatoilHydro."
Over at Northern Rock, the shares were heading south again. They lost 57p to 216.25p on growing concerns that any rescue bid would leave existing shareholders with very little.
Before the market opened the stricken bank announced it was indeed in preliminary takeover talks but revealed nothing that was not already known.
Collins Stewart said: "We continue to believe Northern Rock has little future as an independent entity but feel that rational bidders will be unlikely to pay more than 200p for the bank. We reiterate our 130p stand-alone price target, 190p takeout valuation and sell recommendation."
At Panmure Gordon, analyst Sandy Chen crunched some numbers on the proposed Virgin deal.
"We've set out some indicative numbers in a simple set of scenarios, assuming a £500m cash injection and a £1bn cash injection. We've also assumed that Virgin would want a super-majority of circa 75%, in order to run Northern Rock without any opposition from existing or potential shareholders (eg. the Northern Rock foundation)," he said.
"This would point to Virgin offering between 40p (with a £500m injection) and 80p (with a £1bn injection) per new share – substantially below the circa 250p for the current shares. Making further assumptions that, after two to three years of restructuring, Northern Rock shares trade at a price/book value per share multiple of 1.0 times, this would point to the shares trading between 170p (with the £500m injection) and 200p (with a £1bn injection). With the £1bn injection scenario, this would give 150% returns for the Virgin investors, but 20% downside for current Northern Rock shareholders. Better than nothing, obviously, but still worth only a sell.
Another disaster area was leisure group Rank, down 15.25p to 109.75p after Friday's 20% fall when it issued an unexpected profit warning.
Landsbanki cut its price target on the business from 150p to 90p. It said: "While this may appear dramatic, we would make four points.
"First, at 90p the shares are trading in line with the bookmakers at around 13 times earnings. Even at this rating we would prefer other bookmakers, and so it could be argued Rank should trade at a discount.
"Second at 90p the dividend yield is a not unreasonable 3.3%.
"Third, there can be no guarantee trading does not get worse particularly for bingo. We do continue to question whether bingo has a future in the absence of a change in government policy.
"Finally, the shares are unlikely to be propped up by bid speculation."
Brewing group SABMiller slipped 70p to £14.13 on profit taking after its said half-year beer volumes had risen 11%. Insurer Resolution, in the middle of a complicated takeover battle, slipped 3.5p to 705p. Pearl has offered 660p for the business - which prefers its own planned merger with Friends Provident - but Standard Life confirmed today it may bid itself, in tandem with Swiss Re. However, this might initially amount to no more than 700p a share, analysts believe.
The Takeover Panel has now set an October 25 deadline for the interested parties to throw their hats into the ring.
Elsewhere Legal & General lost 6.3p to 135.5p as JP Morgan made an underweight recommendation and set a 130p target.
"We believe the sell-off in the stock is not yet complete," said the bank. "Annuities represent 53% of new business margins, but are likely to fall following regulatory changes. A slowing housing market and competition will, we expect, see the 31% of new business profits from protection margins also fall."
Lower down the market troubled heating systems group Worthington Nicholls lost 1.5p to 20.5p as it said it would write off £6.5m worth of assets following a review of its accounting policies.
Analysts at Daniel Stewart issued a sell note and said: "We have cut our forecasts for Worthington Nicholls following the latest update from the company. There is no guidance from management but, in the light of last year's break-even result we have cut our forecast for September 2008 from £2.2m to £840,000 and for September 2009 from £3.9m to £1.37m.
"The share price reaction to the most recent news – a £6.5m write-down of debtors and a 'substantial' goodwill write-down – has been relatively small, with a drop of just 10%. Our new target price is 13p."