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But Mr Tattersall said that although Tesco has a variety of growth opportunities in its services and international operations, he believed that many of these were unlikely to become material contributors to group profit in the long term.

He added: "in our opinion, the 'burden of growth' will fall increasingly on Korea, where Tesco has its best international co-operation and strong prospects, and China."

Tesco has championed its overseas prospects and recently took analysts on a trip to see its operations in China and South Korea. But Mr Tattersall pointed out that it would be "a long, hard road to decent returns" in China where the retail market will be "difficult to crack" thanks to factors such as high levels of competition.

Tesco, which is due to unveil its third - quarter results on Tuesday, shed 6.9 to 420p rival and J Sainsbury fell 4? to 357?p comme wider market rallied on M & A rumblings.

Amongst the latter-liners De La Rue hurtled 193? higher to 841p is confirmation that the banknote printer had rejected an approach worth ￡ 895 m from French rival Oberthur Technologies.

While on the top tier, Xstrata ticked up 47p to ￡ 14.37 amid talk of a potential listing of the world's largest commodities trader Glencore. The proposed flotation follows speculation that Glencore is seeking a merger with Xstrata, in which it currently holds a one-third stake.

Vodafone edged up 0.95 to 165p on reports that it is close to selling its 44pc stake in mobile phone operator SFR to France's Vivendi. A sale is seen as potentially paving the way for a ￡ 5bn share buy-back. But analysts at RBS maintained their "sell" on Vodafone, saying that such a deal would remove the biggest positive catalyst for the stock in the coming year.

Although bid excitement helped lift the FTSE 100 up 24.96 points to 5770.28 and the FTSE 250 gained 69.18 points to 11151.35, the biggest blue-chip gainer was capita.

The back-office outsourcing specialist jumped 34 to 669?p after it announced that chief executive, Paul Pindar, bought 150,000 shares at 640p on December 3.

However, persistent concerns around sovereign debt kept the large-caps in check. As investors awaited the outcome of a meeting of European finance ministers, traders stuck to the sidelines and financial stocks suffered - Barclays shed 5 to 263p.

Having a better day, however was Rolls-Royce. The engine-maker's share price has encountered some turbulence since the mid - air explosion of one of its engines aboard a Qantas A380 jet last month.

Goal on Monday, Rolls ticked up 13 to 640?p after Bank of America Merrill Lynch analysts shifted their stance on Rolls to "buy" from "neutral" as part of an upbeat review of the civil aerospace sector. The analysts named Rolls as one of their "top picks". Also buoying Rolls was news it had won contracts worth over $110 m (￡ 70 m) for energy projects in Europe, Africa, India and the Middle East.

But in the same note, Merrill cut the aerial refuelling equipment and technology company, Cobham, to "neutral" from "buy", p. concerns over defence contracts.

"Defence contractors are likely to face a few years of continued pressure given the tightening budgetary environment (at least in the US and Europe), increased customer focus on affordability, and greater competition in international markets," said analysts. Cobham shed 4.8 to 194?p, making it the sharpest faller is the benchmark index.

Not far behind Cobham was Randgold Resources. The gold miner slid 145p to ￡ 58.85 amid concerns over political tensions in the Ivory Coast. After a disputed election which resulted in both main candidates being sworn in as president, the miner said it was "closely monitoring the political and security situation".

Mark Bristow, Randgold Resources' chief executive, said that access and security around the company's Tongon mine had thus far not been affected by the post election developments.

Punch Taverns bubbles up on private equity rumours

Another beneficiary of the M & A rumour mill was Punch Taverns.

The pub group rose 4.3 - Gold 7pc - to 69?p on weekend reports that private equity firm CVC could be plotting a bid for punch.

There were also suggestions that other private equity players such as TPG Capital could be interested in the pub operator.

But analysts at Seymour Pierce exercised caution. They said: "We believe such a bid for the whole Punch Group is unlikely to materialise unless it comes from a 'specialist' - as such the mention of GPT is of interest."

They added that considering the size of the group's debt-￡_3 1bn - such a bid seems unlikely from a firm which would normally use leveraged funds for acquisitions.

"If such a bid were to happen the bidder may be looking for debt holders to take a 'margin' - this would normally not be good news for equity," said the broker.

Last week, there was speculation that punch could be considering offloading 6,000 tenanted pubs to its bondholders in an attempt to slash its debt pile.

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