London shares are nursing a modest loss at midday, as the market consolidates after Monday's rally. But traders say the downturn may be short lived.

"People are putting cash into selected stocks, I think that will be the pattern between now and the end of the year," said one senior trader. "I wouldn't be surprised if there was a mark-up before Christmas."

The FTSE 100 was down 21 at 5854, on a provisional volume for the whole market of 413m shares.

The London market had an unexpectedly firm start, despite weakness in Asian markets overnight, but by mid-morning consolidation that was expected in the wake of yesterday's 134 point advance had gained the upper hand.

The FTSE 100 index touched a high of 5893.3 in the first forty minutes of trade and posted its intraday low of 5849.0 just half an hour later.

Traders said, however, that the corporate activity that inspired yesterday's rally could still be a factor. "Clearly there is no selling pressure on the market, it is likely to be underpinned by more mergers and bids before the end of the year, and there is an awful lot of cash around," the trader said.

Engineering giant GEC furthered speculaton of a European defence mega-merger after announcing it is to split its civil operations from its aerospace and defence businesses. At the forefront is talk about a tie-up with British Aerospace. GEC shares are 20 pence adrift at 536p.

Another decliner was Diageo, down 11p at 683p amid fears that French luxury group LVMH will sell up to half of its 10.9% stake in the drinks group. LVMH denies the plan.