LONDON (MarketWatch) -- The U.K.'s benchmark index ended with a small loss Monday, with weak banking shares offsetting deal news in the medical-devices industry.
The FTSE 100 fell 16.37 points, or 0.3%, to close at 5,985.70.
Most financial stocks lost ground, with Barclays PLC (BCS) dropping 1.4% and Lloyds Banking Group (LYG) down 2.2%.
Fund manager Schroders PLC fell 2.4% after it was downgraded to neutral from buy at UBS on valuation grounds. And the London Stock Exchange was also hit by a broker downgrade, falling 0.1% after it was cut to sell from hold at Citigroup.
Mining stocks were also a drag on the main index as most commodity prices retreated.
Shares in Rio Tinto PLC (RIO) and Xstrata PLC each fell 1.2%.
On the upside, Smiths Group PLC jumped 7.7% after it said late Friday that it has rejected a 2.45 billion pound ($3.88 billion) offer for its Smiths Medical unit from buyout group Apax Partners.
The division supplies specialist medical devices and contributed nearly a third of the company's revenue in 2010.
"Ever since Philip Bowman took charge of Smiths Group in late 2007, the expectation has been that its destiny lies in a break-up of the conglomerate," said Edison Investment Research analyst Roger Johnston.
"With the turnaround nearly complete and markets in recovery mode, we felt that it is only a matter of time before a satisfactory bid will kick-start the process," he added in a note.
Johnston said other private equity firms could bid for the medical division because of its strong cash generation, while U.S. medical device companies such as Covidien Public Ltd Co. (COV) could be interested because of significant cost-saving opportunities.
Shares in Smith & Nephew PLC jumped 3.5% after the Sunday Times newspaper reported that Johnson & Johnson (JNJ) is considering a fresh takeover bid for the manufacturer of replacement knees and hips.
BP (BP) gave up strong early gains to end up just 0.2%. The oil giant said late Friday that it has inked a share-swap deal with Russia's Rosneft, under which the two companies will also cooperate over drilling in the Arctic Ocean.
The two companies are cementing the agreement by handing each other close to $8 billion of their respective stock.
Goldman Sachs analyst Michele Della Vigna said in a note to clients that the deal will likely dilute BP's earnings by around 5%.
"We think that this is a unique opportunity for BP to gain access to a prospective new frontier area, where direct access as a non-Russian company would not have been possible," Goldman said.
Jonathan Jackson, head of equities at Killik & Co., said the deal provides "the potential to access another significant leg of growth," but added that it would make it much harder for Exxon Mobil Corp. (XOM), Royal Dutch Shell PLC (RDSA) or Chevron Corp. (CVX) to make a bid for BP, which could dampen the stock's prospects.
Another heavyweight climber was Vodafone Group PLC (VOD), which gained 1.8% after a report in the Mail on Sunday newspaper that the company is close to selling its 44% stake in French mobile group SFR for around ��7 billion.
French group Vivendi SA , which owns the rest of SFR, will have the cash to buy the stake within weeks, the report said.
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