It was a shaky start again as investors took profits in miners, but there were positive signs from the telecoms sector.
It had to happen of course, and today saw the profit takers move into Rio Tinto. After all the recent excitement of the BHP Billiton bid, Rio's shares paused for breath, slipping 246p to £54.12. Sentiment was not helped by a report that China Development Bank had denied buying a stake in Rio, which investors had been hoping would presage a bid battle.
Meanwhile a continuing fall in metals prices left Vedanta Resources and Xstrata around 4% lower.
But the Rio/BHP bid has sent analysts scurrying to find the next deal in the sector. Credit Suisse has plumped for a tie-up between Xstrata and Anglo American.
The bank said: "The market appears to be dismissing the possibility of an Anglo American and Xstrata tie up given both shares were down heavily yesterday. We believe, however, that both companies have significant attractions to offer to each other. In a scenario whereby Anglo were to offer £42 for Xstrata using 50% shares /
50% cash, we estimate such a deal would be 18% earnings accretive to their estimated earnings for 2008 assuming synergies of $1.5bn.
"On the same terms, if Xstrata were to offer £42 for Anglo we estimate it would be 5% accretive to Xstrata's 2008 earnings."
It added that a buyer of Anglo American would gain exposure to the world's largest platinum producer, something which does not often come up for grabs.
Still, as Credit Suisse suggested, the share prices of the two companies do not yet seem to have taken the idea on board.
With the Dow Jones Industrial Average closing below 13,000 for the first time since August and UK inflation figures reducing the likelihood of an immediate interest rate cut, the FTSE 100 was down 6.9 points to 6331.0 by mid-morning.
The fall would have been worst if not for good performances from Vodafone and Cable & Wireless following their results. Both added around 3%.
Royal Bank of Scotland, one of the banks hit by fears of its exposure to the US sub-prime fallout, added 8p to 447.75p on vague talk of stakebuilding, with a bit of bid speculation thrown in.
Down in the pubs, a recent bit of takeover speculation seems to have fizzled out. There has been a lot of bar-room chatter that Greene King and Marston's could benefit from merging. However it appears Greene King has been telling analysts it has no desire for such a deal, preferring to concentrate on organic growth, including expanding its Loch Fyne restaurant chain. Still, this doesn't seem to have upset the companies' share prices. Greene King added 8p to 867p while Marston's rose 0.25p to 330.5p.
