The fragility of investor confidence was exposed today when the FTSE 100 Index lost hold of early gains of 66 points to close in negative territory.
Losses by pharmaceuticals stocks and fears over inflation were behind the late sell-off as the Footsie closed 3.7 points lower at 5164.1. This followed the worst session in more than a year when the market retreated 96 points yesterday.
Drug maker AstraZeneca led the market lower with a 2% decline or 50p to 2581p and was followed by major rival GlaxoSmithKline, which fell 23p to 1432p.
But there was better news for Shire Pharmaceuticals after it announced two new lawsuits against companies hoping to sell copies of its Adderall XR hyperactivity drug. Shire was the third highest riser, up 3% or 17.5p to 648p.
Takeover activity in the oil and gas sector had driven gains for the wider market in the opening hours of trading, with a £1.2 billion offer for second-tier firm Paladin Resources boosting shares in rivals such as Cairn Energy.
Investment in Cairn drew a line under a tough period since it returned to the top flight, with its shares yesterday hitting their lowest level for two months.
Cairn advanced 40p to 1632p today as the oil and gas sector rallied on news of the bid for Paladin, but this was less than half the gains it enjoyed at its intra-day peak.
Outside the top flight, Paladin raced 27% higher or 74.5p to 349.5p and there were gains for Tullow Oil, up 5% or 11.75p to 230.5p, and Burren Energy rising 4% or 31.5p to 752p.
But sector heavyweights were more subdued with BP up only 1.5p at 609.5p and Royal Dutch Shell losing 10p to 1750p.
Mining stock BHP Billiton lifted 7.5p to 792p after upbeat economic news from China, the world’s largest importer of commodities.
However, blue-chip rivals Rio Tinto and Antofagasta were not faring as well - off 4p and 18p at 2130p and 1433p respectively.
Poker giant PartyGaming was unchanged at 78p ahead of a trading update tomorrow on its performance in the third quarter.
Insurance firm Legal & General was also stuck on its opening mark of 102.75p even though it said third quarter sales jumped 31% to £327 million after claiming a greater slice of the UK life and pensions market.
Supermarket group Morrisons cheered with its first half results despite racking up half-year losses of £73.7 million. Investors welcomed the increased certainty offered by the figures as shares climbed 3.5p to 170.5p, while rival Sainsbury’s was up 1.5p to 279p.
On the downside, shares in Cadbury Schweppes fell 8.5p to 538.5p, with traders seeing some switching into Swiss peer Nestle following better than expected nine-month sales figures.
The highest Footsie risers today were 3i Group up 23p to 741p, Carnival rising 78p to 2782p, Shire Pharmaceuticals up 17.5p to 648p and Cairn Energy rising 40p to 1632p.
The heaviest fallers were AstraZeneca off 50p to 2581p, GlaxoSmithKline down 23p to 1432p, Cadbury Schweppes off 8.5p to 538.5p and Scottish & Southern Energy down 15p to 963p.