A sale of Barclays shares by the Qatari Investment Authority (QIA) dented banking stocks, pulling Britain's FTSE 100 index slightly lower by midday on Tuesday, but the move lifted Sainsbury shares by reviving bid talk.
At 1104 GMT, the FTSE 100 .FTSE was down 12.59 points, or 0.2 percent, at 5,268.95, after ending 1.8 percent higher on Monday at 5,281.54, a new peak for 2009 on the 22nd anniversary of the Black Monday stock market crash of 1987.
Barclays (BARC.L) was a top faller, sliding 4.6 percent on news Qatar was selling 379 million shares worth over 1.3 billion pounds ($2.1 billion).
This led to a jump in supermarket group J Sainsbury shares (SBRY.L), up 4.9 percent to top the blue chip leaders board as traders jumped to the conclusion that Qatar's sovereign wealth fund was planning a renewed offer for the British grocer.
It is indicative of the market that a stock will rise if there's any good or credible talk of takeover, said Jim Wood-Smith, head of research at Williams de Broe in Exeter.
Sainsbury and the QIA declined to comment.
Other banks were mixed. Heavyweight HSBC (HSBA.L) dropped 0.8 percent after good gains in Monday, while Royal Bank of Scotland (RBS.L) fell 1.2 percent but Lloyds Banking Group (LLOY.L) and Standard Chartered (STAN.L) added 0.5 percent and 0.6 percent respectively.
Third quarter earnings from the United States have boosted market sentiment and ensured that equity indexes were close to 13-month highs, and investors will closely watch a further swathe of results due for release on Tuesday.
Pfizer (PFE.N), Coca-Cola Co. (KO.N), State Street (STT.N), Caterpillar (CAT.N), Du Pont (DD.N), Yahoo (YHOO.O) and Lockheed Martin (LMT.N) were all scheduled to deliver numbers.
It's very earnings driven. There have been a very few companies that have missed the number but enough that have beaten them by a country mile to help keep markets broadly firmer, Wood-Smith said.
Today Caterpillar is key as it's a good bellwether for the global construction industry.
Energy stocks were under pressure, with crude CLc1 off 0.5 percent. BP (BP.L), Royal Dutch Shell (RDSa.L) and Tullow Oil (TLW.L) shed 0.6-1.2 percent. BG Group (BG.L), however, rose 1.7 percent supported by an upgrade to 'buy' by Deutsche Bank.
Autonomy (AUTN.L) was the biggest blue-chip faller, down 6.8 percent after the search software company posted Q3 results which saw gross margin fall to 86 percent from 92 percent a year ago, due to costs associated with a new product launch.
Miners were a net positive for the index, with players extending Monday's gains amid optimism over improved demand as corporate earnings recover.
Rio Tinto (RIO.L), Kazakhmys (KAZ.L), Randgold Resources (RRS.L), and Lonmin (LMI.L) rose 0.8-1.4 percent.
Xstrata (XTA.L) reversed early gains, falling 0.3 percent as investors mulled third-quarter production data showing more coal production but lower ore grades that cut copper output.
Pearson (PSON.L) climbed 2.4 percent after the publishing group raised full-year guidance, saying it expected adjusted earnings of at least 60 pence per share following a strong performance from its education business.