Cadbury shares rose nearly 3 per cent to 701p on heavy volume amid talk of a bid from Kraft or Hershey. Warren Buffet's name was also mentioned since he backed Mars's recent takeover of Wrigley. Analysts have been suggesting for some time that a combined Hershey-Kraft break up bid would make sense, now that Cadbury has demerged its drinks arm.

In the event of a breakup, Kraft would take the gum business while Hershey would pick up chocolate.

The FTSE 100 index was relatively flat in morning trading, up just 4.5 at 6202.8 by 10.25am as record oil prices boosted energy stocks but weighed on other stocks dependent on the cheap oil economy.

These included Rolls-Royce, down 2.5 per cent at 401.25p, Thomas Cook, off 2 per cent to 253.75p and Carnival, off 2 per cent to £18.24.

London Stock Exchange fell 6 per cent as it posted in line results which included big falls in volumes in the past two months. Daily Italian volumes had dropped 16 per cent year on year in April while in London daily SETS volumes were down 11 per cent in May year on year. In April there were only 28 London IPOs compared with 269 in 2007.

It said “market conditions remain testing in certain areas” and “primary markets activity is still relatively subdued”.

Alliance Bernstein analyst Dirk Hoffmann-Becking noted that there was no mention of a cost-cutting plan despite the volume falls.

This weighed on Collins Stewart, which has already cautioned about flotations drying up. It lost 8 per cent to 88.5p.

UBS sent bank shares down after launching a deeply discounted rights issue worth 16 billion Swiss francs.

Barclays and Royal Bank of Scotland fell 2.5 per cent.

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