Telecoms led the retreat, with Footsie ending 75.4 points off at 6,206.8. At one time it was down 122.8.
C&W tumbled 79.5p to 751p, Telewest Communications 20.5p to 243.5p, and Colt Telecom 51p to 939p. BT dropped 26.5p to 1,058p.
In their hurry to unload the C&W interest, the Germans accepted a 724.2p- a-share deal from ABN Amro, NM Rothschild and Cazenove. The trio went on to place the shares at 735p. With C&W closing at 830.5p on Friday, institutions found the yawning discount irresistible and clamoured to buy the 246 million shares.
Just why Veba was prepared to sell at a price so far below Friday's close is something of a mystery. Certainly it set alarm bells ringing, rousing nagging fears that the first crack had appeared in the seemingly unstoppable telecoms charge. The sale also created doubts about C&W's prospects, with the Germans displaying an apparent lack of faith in the telecoms giant.
It also destroyed most of the day's planned trading. Institutions were left short of cash. They had to find around pounds 1.8bn with settlement due at the end of the week for their C&W shares, so cash they had provisionally earmarked for any other buying operations had to be transferred to their C&W coffers. Few would want to sell shares for special early delivery because of the extra charges involved. Much better, therefore, to put all available resources behind their bids in the C&W auction and delay any buying plans.
With C&W's share turnover a massive 528.6 million, the day's volume almost touched 1.5 billion, one of the highest on record.
With so much attention centred on C&W the rest of the market played an almost inaudible second fiddle. The supporting indices lost their enthusiasm. The mid cap's remarkable 15-day winning streak came to an abrupt end with a 41.9 fall to 5,518.9; the small cap slipped 1.2 to 2,366.6.
The small cap is still being influenced by management buyouts. Housebuilder Cala jumped 50p to 157.5p as a bid of 165p a share was mooted. In a variation on the buyout bandwagon Somic, up 10p at 80p, seems likely to sell its fabrics business to management for around pounds 850,000 and become a cash sell called Tarpan.
Fibernet, although ending talks with possible bidders, firmed 5p to 447.5p and SCi Entertainment ended 22p higher at 81.5p, although the company said it knew of no reason for the advance.
Terranova, the foods group, held at 104.5p despite rejecting an offer of 125p (thought to be from Unigate), and volatile Tracker Network added another 70p to 580p following Friday's management buyout statement.
First Choice, the holidays group, fell 14.5p to 173p after agreeing a merger with Kuoni of Switzerland. Talk of a possible German counter-offer from Preussag continues to be heard. There were vague reports of an Airtours deal, with the shares firm at 507.5p. Constructor Bandt firmed 1p to 32p on bid hopes.
London International, the condom maker where bid talks are on, firmed 2p to 153p in two-way trading. The shares have been unloved since Safeskin, the US group touted as the most likely bidder, posted a shock profits warning.
Manchester United firmed 9p to 240p, a peak, on weekend suggestions that profits from pay-as-you-view television could force BSkyB to increase its bid, currently under Westminster consideration.
Psion, the hand-held computer group, was one of the day's best performers, jumping 105p to 860p on reports that it is moving into mini-notebook computers with IBM selling the equipment in the US; a new trading alliance by its Symbian joint venture was another bullish influence.
Tomkins, on its share buyback, fell 10p to 224.5p, but Reed International, after its recent decline following results, recovered some lost ground, up 25.5p to 525.5p. PowerGen, ahead of analyst meetings this week, rose 13p to 683p. Supermarkets, ruffled in recent weeks by the alleged price war, perked up on hopes that the Office of Fair Trading report will be less draconian than expected.
Enterprise Oil had a shaky time, off 38.25p to 303p. The market is uneasy about the possibility of the planned union with Lasmo failing to materialise. The sale of 1.2 million shares by Mercury Asset Management, part of Merrill Lynch, increased the doubt factor.
HW, a recruitment group, followed Corporate Services with a profits warning and fell 37.5p to 82.5p; Superscape, an IT group, dropped 41p to 149p on a warning.
Queens Moat Houses, once seemingly destined for the corporate graveyard, was little changed at 26.5p after Merrill Lynch upgraded its advice to accumulate. The ending of the hotel chain's interest-payment holiday will lower profits over the next two years but "good management is progressively improving the structure and position of the company".
Viridian, the former Northern Ireland Electricity, was little changed at 693.5p as Warburg Dillon Read increased its target price by 50p to 800p. Shire Pharmaceuticals, after Friday's profits surge, rose 43p to 516.5p, and pub chain JD Wetherspoon frothed a further 15.5p to 273p on its results.
BATM Advanced Communications jumped 32p to 295p ahead of a presentation at stockbroker Shore Capital. Highbury House Communications joined the Internet party, climbing 4p to 17.25p. The company has launched a joint venture to explore various Internet publishing initiatives.
Oxford Biomedica, a gene-therapy group, rose 9p to 27p, apparently on indications that Colin Blackbourn had acquired shares. He gained a reputation as a small company investor with AromaScan, a recent success. The shares have climbed from 1.75p in September to 17.5p (up 0.5p) after being revamped. He claims Oxford, raising cash through a rights issue, has nine promising products in development.
SEAQ VOLUME: 1.49bn
SEAQ TRADES: 94,310
GILTS INDEX: 115.23 -0.05
RICHARD THOMPSON, whose business career has included chairing the struggling first division football club Queens Park Rangers, has become chairman of Whitchurch. He intends to take the former food group into the film and television industries.
He is buying the food operations - largely meat processing and pet-food businesses - for pounds 6.5m. The shares held at 32p. As a food group Whitchurch has struggled; its shares were 65p four years ago.
PETRA DIAMONDS, with interests in Angola, held at 71.5p. Seymour Pierce has become the group's stockbroker, replacing IA Pritchard, which appears to have abandoned its corporate operations.
Petra now has Gold Fields of South Africa as a shareholder. In exchange for shares, it acquired the diamond interests of Gold Fields, which cover rights over 10 properties in South Africa. Petra shares topped 150p last summer; they were floated at 30p by IA Pritchard.