London close: Stocks drop into the red as M&A fever fails to sustain optimism

BG Group, which had soared as much as 40% early on, pared gains to finish 26.7% higher after the natural gas outfit recommended a £47bn takeover offer from Shell. Shares in the latter, however, plunged firmly into negative territory as a result.

Not even bid speculation surrounding Sky and ARM Holdings could support markets, as nervousness ahead of the latest Federal Reserve minutes and uncertainty about Greece weighed on sentiment.

The Footsie, which touched a high of 7,012.06 initially, fell 24.36 points (-0.35%) to 6,937.41 after three days of gains. The index surged 1.9% on Tuesday, its biggest rally since January.

Minutes from the 17-18 March Federal Open Market Committee meeting were due for release at 18:00, though any hawkish comments on rates will likely be taken with a pinch of salt following last week's disappointing non-farm payrolls figure.

Investors were also showing their nerves ahead of Thursday's deadline for Greece to pay back €458m to the International Monetary Fund. Meanwhile, Prime Minister Alexis Tsipras's decision to fly to Moscow to meet with Russian President Vladimir Putin has also concerned many.

"Even if the Greeks were to pay the debt as expected, the timing of this meeting shows the Greeks want to be seen to not be playing by the book," said analyst Joshua Mahony from IG.

BG Group, Sky and ARM gain on M&A

BG Group came off its highs but was still the standout riser after its board recommended a £47bn takeover offer from Shell. The bid values BG at around 1,350p per share, a 50% premium to its closing price of 910.4p on Tuesday. If the transaction completes, BG shareholders will be left with a 19% stake in the enlarged company.

While Shell itself dropped 8.6% following the news, others in the sector were rising on hopes that the deal will trigger a new wave of industry consolidation. Larger players such as BP have held up well amid the oil crisis compared with their smaller peers and could now look to snap up struggling producers, analysts said.

Sky was in demand amid bid speculation that France’s Vivendi could table a bid for the UK listed TV and broadband operator. Though Vivendi representatives denied Sky is an acquisition, market participants piled into Sky stock on an earlier Reuters report that Vivendi could pay up to £28bn for the company.

Shares in ARM Holdings rose after a report in a Chinese news outlet pointed to US consumer tech giant Apple being a likely suitor to snap up the UK chipmaker.

Mining stocks mostly erased gains after an earlier rise as risk appetite took a hit, with BHP Billiton, Glencore and Rio Tinto finishing down. Precious metal producers Randgold and Fresnillo were also tracking gold and silver prices lower.

Experian shares received a boost by Credit Suisse which lifted its stance on the information services and credit checking group from 'neutral' to 'outperform', saying it expects a "re-rating".

Market Movers
techMARK 3,203.11 +0.09%
FTSE 100 6,937.41 -0.35%
FTSE 250 17,561.47 +0.23%

FTSE 100 - Risers
BG Group (BG.) 1,153.00p +26.65%
Experian (EXPN) 1,181.00p +2.70%
ARM Holdings (ARM) 1,123.00p +1.91%
Shire Plc (SHP) 5,485.00p +1.86%
Burberry Group (BRBY) 1,743.00p +1.69%
Sky (SKY) 1,039.00p +1.56%
Hargreaves Lansdown (HL.) 1,185.00p +1.54%
Direct Line Insurance Group (DLG) 322.70p +1.22%
London Stock Exchange Group (LSE) 2,550.00p +0.99%
St James's Place (STJ) 982.50p +0.82%

FTSE 100 - Fallers
Royal Dutch Shell 'B' (RDSB) 2,019.50p -8.56%
Royal Dutch Shell 'A' (RDSA) 1,982.50p -5.32%
Ashtead Group (AHT) 1,064.00p -2.83%
Randgold Resources Ltd. (RRS) 4,691.00p -2.80%
Fresnillo (FRES) 686.00p -2.69%
Aviva (AV.) 550.00p -1.96%
Babcock International Group (BAB) 994.00p -1.88%
CRH (CRH) 1,752.00p -1.68%
Tesco (TSCO) 246.85p -1.65%
Smiths Group (SMIN) 1,120.00p -1.58%

FTSE 250 - Risers
Ophir Energy (OPHR) 156.30p +7.35%
RPS Group (RPS) 244.90p +4.66%
NMC Health (NMC) 695.50p +4.59%
Drax Group (DRX) 391.10p +4.49%
Tullow Oil (TLW) 313.60p +4.43%
Fidelity China Special Situations (FCSS) 158.60p +4.07%
Ted Baker (TED) 2,678.00p +4.04%
Michael Page International (MPI) 550.00p +3.58%
Premier Farnell (PFL) 188.40p +3.52%
Hellermanntyton Group (HTY) 347.50p +3.27%

FTSE 250 - Fallers
Acacia Mining (ACA) 271.10p -3.66%
Amec Foster Wheeler (AMFW) 898.50p -2.44%
Euromoney Institutional Investor (ERM) 1,134.00p -2.16%
Rank Group (RNK) 186.00p -1.90%
Brown (N.) Group (BWNG) 321.90p -1.89%
International Personal Finance (IPF) 490.60p -1.88%
Soco International (SIA) 169.50p -1.80%
JD Sports Fashion (JD.) 471.30p -1.79%
Millennium & Copthorne Hotels (MLC) 578.00p -1.78%
Wood Group (John) (WG.) 665.50p -1.77%