(Updating with further details)
LONDON (AFX) - Leading shares ended the session lower as disappointing trading updates from Cadbury Schweppes and Pearson added to weakness in oil and mining heavyweights, but a turnaround on Wall Street capped losses, dealers said.
At the close, the FTSE 100 index was down 34.1 points at 6,126.8, but off an afternoon low of 6,112.9, with the wider market mixed.
Volume though was pitiful, with 2.2 bln shares changing hands in 318,874 deals.
Meanwhile, Wall Street turned higher in early deals as crude prices slumped more than 3 pct, but gains were capped as a lacklustre same-store sales report from Wal-Mart added to jitters over the health of the economy.
By London's close, The DJIA was up 1 point at 12,091.30, having traded as low as 12,049.90.
Back in London, Cadbury Schweppes fell 8 pence to 529 with investors disappointed by the confectionery and soft drinks group's new financial targets -- less than a week after a downbeat trading update.
Cadbury reiterated it is targeting revenue growth of 3 to 5 pct per annum from 2007 but abandoned its 50-75 basis points margin target in favour of 'growth in operating margins over time'.
In response, UBS reiterated its 'neutral' stance.
Pearson also was out of favour, off 12 at 769, amid some profit-taking after an in-line trading update failed to inspire.
Pearson said it is on track to post its 'highest profits ever' this year while reporting strong trading in its first nine months, in line with its expectations.
In reaction, Panmure Gordon reiterated its 'sell' advice and said headline profits came in broadly as expected but not enough to spark upgrades.
As a result, the broker said it is keeping its EPS forecasts of 38.3 pence this year and 43.2 pence next year unchanged.
This leaves the stock trading on 20.4 times and 18.1 times 2006 and 2007 price earnings -- a level the broker believes is 'grossly overvalued'.
Other media issues were weaker in sympathy -- Reuters lost 3 to 448-1/4, while Reed Elsevier fell 2-1/2 to 597.
And broadcaster ITV was also under pressure, down 1-3/4 pence to 105, amid weekend press reports it is considering a takeover bid for Scottish ITV franchise holder and Virgin Radio owner, SMG.
Drugs group Shire, however, remained the top blue-chip faller, shedding 27 to 940 on profit-taking after Friday's well-received third quarter results.
Deutsche Bank today reiterated its 'buy' stance on Shire although it cut its target to 1,272 pence from 1,330.
Elsewhere, mining stocks were also under pressure as last week's weak US third quarter GDP offset a spike in metal prices.
BHP Billiton lost 21 pence to 1,000, Xstrata fell 44 to 2,221, Vedanta eased 32 at 1,432 and Rio Tinto gave up 39 to 2,858.
Kazakhmys was also weaker, down 31 to 1,185, further knocked by a mixed production report, with copper output rising and gold production falling in the third quarter.
Oil stocks were likewise under pressure, with crude languishing below 60 usd a barrel -- sending BP down 10-1/2 at 591-1/2, BG off 1-1/2 at 704 and Royal Dutch Shell losing 4 at 1,886.
And in broker comment, Home Retail Group shares lost 9-1/4 at 399-1/4 after JP Morgan started coverage on the group with an 'underweight' recommendation and 390 pence target.
The broker said the group's low EPS growth, returns and cash flow generation warrant a P/E discount to the UK retail sector of at least 10 pct and believes these metrics also make HRG unattractive to private equity.
In contrast, Standard Life was up 4-1/2 at 287-1/2 after the Sunday Express reported French insurer AXA is considering making a 7 bln stg takeover approach for the recently floated insurance group.
In an unsourced report, the newspaper claimed Nicolas Moreau, the new UK chief of AXA, is keen to add Standard Life's UK life assets to its business, having recently failed in a bid to take over the life assurance arm of Lloyds TSB PLC's Scottish Widows for 8 bln stg.
Brokers were sceptical, however, with Merrill Lynch saying it believes the story is 'very unlikely,' while Cheuvreux described the report as having 'below average credibility'.
Peers Friends Provident took on 2 at 194 ahead of a third quarter sales update tomorrow, Prudential rose 10-1/2 at 641 and Aviva was 1-1/2 to the good at 771.
Utility stocks also remained in demand, adding to Friday's gains as investors continued to welcome news Morgan Stanley plans to invest 3 bln usd in the carbon trading market.
In reaction, Drax shares gained 13 to 817, and International Power was up 1 at 335-1/2.
Drax was further boosted as Lehman reiterated its 'equal-weight' stance, although it said it continues to see the stock as the best value pure play UK generator in the sector.
However, Hanson was the top performer, rallying 16-1/2 to 727-1/2 after Australian building materials group Rinker rejected a 12.8 bln usd bid from Mexican cement giant Cemex as inadequate.
The rejection has raised hopes the Mexican cement group may yet make a move for its UK peer.
Sentiment was further boosted by a bullish note from broker ABN Amro which claimed Hanson's assets should attract a higher valuation than currently implied by the market.
On the second line, Wellington Underwriting was 6-1/4 higher to 117-3/4 after fellow Lloyd's insurer Catlin Group unveiled a 591 mln stg cash offer for the group.
Catlin, however, was down 17 at 491-1/2.
Elsewhere, shares in QinetiQ Group were also higher, up 5-1/2 at 188 after the Sunday Telegraph reported the group is poised to beat BAE Systems to a 10 bln stg UK Ministry of Defence training contract.
And M&A news, lifted Speedy Hire 18 higher at 1,038-1/2 after the tool rental group bought Lifting Gear Hire for 13.5 mln stg in a cash and shares deal.
On the downside, Wolfson Microelectronics was the top faller, down 12 at 292-1/4, extending Friday's falls following a 'dead cat bounce' earlier last week, with Scottish broker McCall Aitken McKenzie today repeating its 'sell' stance.
Peer Arm was also under the cosh, off 4 at 109, ahead of third quarter results tomorrow. newsdesk@afxnews.com tfn-lon-rn/ro/tfn-lon-rn/slm COPYRIGHT Copyright AFX News Limited 2006. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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