The FTSE 100 fell on Friday, with Wall Street seen extending losses after a Philadelphia Federal Reserve survey sparked concerns over U.S. growth and corporate profitability, but renewed takeover talk buoyed Hanson.
Hanson rose 1.3 percent in heavy volume on continued talk of takeover interest from Mexico's Cemex, traders said. Construction and materials was the strongest sector by index points, followed by oil and gas producers.
U.S. crude oil recovered further towards $62 after a six week dive. BP was up 0.4 percent after it agreed a deal with China National Offshore Oil Co for the export of Indonesian liquefied gas to China from early 2009, slightly behind an earlier schedule. Royal Dutch Shell tacked on 0.8 percent.
By 12:02 p.m., the FTSE was down 0.97 percent, or 57.3 points, at 5,839.4, in line with declines across European markets and after the Nikkei fell 1.26 percent to a six week closing low.
The gains failed to offset what strategists described as an overreaction to the Philly Fed survey and its influence on Britain.
The Philly Fed survey was a bit of a shocker, and all constituent parts were weak. Analysts may have to take the knife to earnings estimates and this is what the market focuses on. The FTSE is affected because it has 70 percent of its earnings from overseas, which is led by the U.S., said Mike Lenhoff, chief strategist at Brewin Dolphin.
The good news is if the U.S. economy is that weak, the Fed will cut interest rates. If so, it will carry through to the UK, and the MPC could say it had better not proceed with a rate hike in November. But we're not there yet because the market has overreacted, he said, referring to the Philly Fed survey.
Financials were the main decliners. Man Group fell 1.6 percent after chief executive Stanley Fink called for more regulation around the sector, although he warned that changes would have to happen gradually to avoid unnecessary risks for the $1,200 billion (631 billion pound) global industry.
Banks fell as takeover talk faded around Barclays, sending the stock down 1.6 percent, traders said.
Among insurers, Old Mutual lost 2.6 percent after South Africa's rand slipped to a 3 year low versus the dollar.
In the drinks sector, SABMiller was similarly hit by the rand and by the fact it has significant business in the United States. SAB lost 2.3 percent, and Scottish & Newcastle fell 1.2 percent in sympathy. Diageo slipped 0.9 percent although JP Morgan recommended switching into it from France's Pernod Ricard for less risk and greater reward.
Morrison Supermarkets fell 2.8 percent, giving back part of Thursday's 7.7 percent rise which several analysts had said made it too expensive. The fall came despite Goldman Sachs removing the company from its conviction sell list, although it remained a sell. J.P Morgan upgraded Morrison to overweight from neutral, but cut Tesco, which slipped 1.2 percent.
Base metals rose, underpinned by gold, oil and a weaker dollar. Miners declined after an early positive start, led by Kazkhmys, down 1.9 percent, after HSBC recommended investors switch from it into Xstrata, which was steady. Rio Tinto slipped 0.6 percent.
Brambles edged down 0.1 percent after France's Veolia Environnement won conditional clearance from the European Commission to buy its British waste management arm.
Partygaming was steady although aides said U.S. Congressional leaders were trying to forge a compromise allowing them to push through legislation banning most Internet gambling.
Among telecoms, BT fell 1.9 percent on talk it is looking for more overseas acquisitions.
And shares in MFI Furniture Group extended gains to 11.4 percent after it offloaded its loss making retail operations to private equity group Merchant Equity Partners. It plans to change its name to Galiform Plc and focus on its profitable Howden Joinery trade arm.