London close: UK stocks retreat from two-month high as Petrofac, miners fall

A wave of M&A news failed to give UK markets a boost on Monday as investors took profits after stocks hit their highest in two months the previous session.The FTSE 100 finished 0.3% lower at 6,730 with a massive drop in the share price of oilfield services firm Petrofac and weakness in the mining sector offsetting bid activity which boosted shares of Friends Life, BT Group and Smith & Nephew.A surprise interest-rate cut from the People's Bank of China (PBoC) saw London's blue-chip index settle at 6,750.76 on Friday, a closing level not surpassed since 22 September when it reached 6,773.63."Traders quickly cashed in their chips on the back of the Chinese interest-rate cut and now the city is wondering if one rate reduction is too little too late for Beijing to hit its annual growth target," said analyst David Madden from IG.Speculation continues that the PBoC could ease policy further amid widespread concern over a drop in prices.Very little economic data was released on Monday, though things are likely to pick up later in the week with gross domestic product estimates due out in both the US and UK, inflation figures in the Eurozone and a host of data from Japan.Investors will also be looking ahead to Thursday's meeting of the Organization of Petroleum Exporting Countries (OPEC), with members facing a tough decision over whether to cut output in the wake of a 30% slump in crude prices since June.Petrofac plummets, M&A activity returnsPetrofac's share price dropped 26% after the group scaled back its profit assumptions, saying that depressed oil prices and the timing of deliveries will result in a weaker bottom line. The company said net profits for 2014 will be at the lower end of the guided $580m-600m range, but would fall to just $500m in 2015. It had previously predicted "strong earnings growth" next year.Mining stocks were also weighing on the FTSE 100, pulling back after a PBoC-inspired rally on Friday. Anglo-Australian miner BHP Billiton was leading the declines after cutting its spending plans for next year; Fresnillo, Anglo American and Rio Tinto were also lower.Friends Life shares jumped 6% as the market reacted to a proposed £5.6bn takeover offer from Aviva late on Friday, expected to create the UK's "leading insurance, savings and asset management business by number of customers". However, Aviva finished firmly in the red with analysts citing uncertainty about the deal with details about potential synergies from the tie-up still unknown.BT advanced after the telecoms giant confirmed rumours that it is in talks with two UK mobile network operators "about a possible transaction in which BT would acquire their UK mobile business". It said one of these operators is O2, owned by Spanish group Telefonica.Smith & Nephew was a strong riser amid speculation that Stryker, the US orthopaedic group, will put in another bid for the medical devices company. The reports come as the six-month cooling-off period that followed the previous offer comes to an end this week.London Stock Exchange was making decent gains after analysts at Citigroup raised their rating on the stock to 'buy', but Hargreaves Lansdown dropped after the same bank cut the shares to 'sell'.On the FTSE 250, transport firm FirstGroup took a hit amid claims it has missed out on the opportunity to win the East Coast mainline franchise. The company's bid is thought to be overlooked in favour of Eurostar and Keolis when the government releases a statement on the final decision this week.Market MoverstechMARK 2,902.59 +0.30%FTSE 100 6,729.79 -0.31%FTSE 250 15,710.06 +0.12%FTSE 100 - RisersFriends Life Group Limited (FLG) 368.20p +5.90%Smith & Nephew (SN.) 1,138.00p +4.40%BT Group (BT.A) 394.10p +3.71%London Stock Exchange Group (LSE) 2,172.00p +3.28%Carnival (CCL) 2,664.00p +1.80%ITV (ITV) 205.00p +1.59%Dixons Carphone (DC.) 426.50p +1.57%Reed Elsevier (REL) 1,074.00p +1.51%CRH (CRH) 1,479.00p +1.09%St James's Place (STJ) 773.50p +0.98%FTSE 100 - FallersPetrofac Ltd. (PFC) 877.50p -26.45%Aviva (AV.) 510.00p -5.38%Hargreaves Lansdown (HL.) 958.50p -5.29%Sainsbury (J) (SBRY) 252.30p -2.85%BHP Billiton (BLT) 1,621.00p -2.47%Fresnillo (FRES) 746.00p -2.29%Weir Group (WEIR) 2,065.00p -2.23%Rio Tinto (RIO) 2,976.50p -2.15%Associated British Foods (ABF) 3,053.00p -2.12%Centrica (CNA) 285.80p -2.12%FTSE 250 - RisersTalkTalk Telecom Group (TALK) 300.50p +6.37%Cranswick (CWK) 1,404.00p +5.17%Polymetal International (POLY) 582.00p +5.05%Card Factory (CARD) 249.70p +4.04%UBM (UBM) 586.50p +3.53%UDG Healthcare Public Limited Company (UDG) 361.40p +3.38%Evraz (EVR) 153.80p +2.95%Inmarsat (ISAT) 762.50p +2.83%AO World (AO.) 217.00p +2.50%PayPoint (PAY) 916.50p +2.40%FTSE 250 - FallersFirstGroup (FGP) 108.20p -9.68%Ladbrokes (LAD) 113.80p -5.40%William Hill (WMH) 339.60p -5.38%Afren (AFR) 69.30p -3.41%Lonmin (LMI) 186.70p -3.26%Hunting (HTG) 683.50p -3.12%African Barrick Gold (ABG) 227.60p -3.03%Tate & Lyle (TATE) 602.00p -2.98%Ferrexpo (FXPO) 71.15p -2.87%Stock Spirits Group (STCK) 247.20p -2.72%