Sage - the biggest loser in the blue chip index on Friday - has been a strong performer in the past few weeks amid gossip it could soon be fending off bids from either SAP, Microsoft or a private equity firm.
However, yesterday UBS downgraded the stock to "sell", arguing it is sceptical about the recent M&A speculation. Michael Briest, an analyst at UBS, said: "We do not see any obvious trade buyers, and feel financial buyers would be unlikely to make a compelling return above 300p at currently accepted leverage levels."
He also said Sage's new chief executive, Guy Berruyer, faces a number of issues including the need for a coherent software-as-a-service strategy; competition from financial buyers for strategic assets; and the maturity of its support-led growth model.
Overall, the FTSE 100 fell sharply in morning trade but recovered in the afternoon despite worse-than-expected US jobs figures. The blue-chip index eventually closed down just 4.52 points at 5657.61. The FTSE 250 lost 40.71 points to 10724.91.
Fresnillo gave up 41p to £12.48 as Bank of America Merrill Lynch downgraded the stock to "underperform" from "neutral".
However, the rest of the mining sector was on good form despite falling base metal prices. Xstrata gained 36p to £12.96 and Anglo American rose 61½p to £27.26.
In the banking sector, Barclays drifted lower as traders chewed over news that Normura sold 220m shares in the bank for Abu Dhabi's Sheikh Mansour bin Zayed Al Nahyan as part of a complex derivatives trade to protect against a loss in value of his 6.3pc stake. Some analysts, though, thought it was actually Nomura that was seeking to hedge its exposure to the bank. Barclays shares lost 6.8 to 297¼p.
Broker downgrades weighed on Autonomy. Panmure Gordon, for example, cut it to "hold" from "buy", while UBS lowered its rating to "neutral" from "buy".
On a more positive tack, Marks & Spencer benefited from several broker upgrades. Credit Suisse raised its rating to "neutral" from "underperform". Tony Shiret, an analyst at Credit Suisse, said: "The market nearly always buys into strategy until it does not work, so now seems a good time to take a more open-minded stance in the run-up to the interims [results] on November 9." The shares edged up 1 to 411p.
On the mid-cap index, Thomas Cook's plans to merge its high street travel and foreign exchange business with the Co-operative Group's lifted its shares 6.1 to 185¾p.
Heritage Oil climbed 24 to 346p thanks to positive broker comment. UBS took up coverage of the stock with a very bullish piece and a 430p price target. Melanie Savage, an analyst at UBS, said the company was her "top pick" of the European exploration and production sector. "Heritage provides exposure to relatively low-risk, high-impact exploration upside in Iraqi Kurdistan and Malta in the near term," she said.
JP Morgan Cazenove was also positive on Heritage. Analysts at the broker said: "Following completion of the Ugandan asset sale and payment of a 100p per share special dividend, Heritage has rescaled itself to be a high-impact explorer, but with a proven track record and very strong balance sheet."
Mining company Petropavlovsk dropped 51p to £10.20 after it cut the size of the Hong Kong initial public offering of IRC, its iron ore unit, by half to $249m due to disappointing demand. In a statement, the company said: "The total demand from investors exceeded IRC's minimum requirements for the shares to be issued by it, but did not meet the company's highest expectations."
Investors were also rattled earlier this week as the Petropavlovsk warned of delays in receiving equipment at its Pioneer gold mine and said it was striving to meet an ambitious production target.
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