A strong performance from HSBC and the banking sector was not enough to steer the FTSE to gains on Monday.
Chinese anger towards the United States over Nancy Pelosi’s visit to Taiwan meant that European markets were fragile despite an initially strong openness.
HSBC shook off jitters in Asian markets to end the day sharply higher after the banking giant battled calls from its largest shareholder for a breakup of the banking giant, saying the move would be costly and risky.
The bank warned that a spin-off or demerger of its Asian business could hurt profits and growth, with the risk of high one-time costs, higher taxes, significant operating costs and possible regulatory issues.
HSBC ended 31.5p higher at 545.2p on Monday.
Nonetheless, the FTSE 100 ended the day down 10.01 points, or 0.13%, at 7,413.42.
Elsewhere in Europe, the German Dax fell 0.03% at the end of the session while the French Cac fell 0.18%.
Michael Hewson, chief market analyst at CMC Markets UK, said: “The start of the new month has been nervous for European markets with decent gains for financials after HSBC lifted the curtain on a positive first half for the UK banking sector, as in general, amid concerns in its main Asian markets.
“Away from those bright spots, European markets rebounded from their intraday highs on reports that US House Speaker Nancy Pelosi would land in Taiwan tomorrow night in defiance of Chinese warnings not to. .
“This rising tension presents a small problem for the United States, especially given Russia’s aggressive behavior in Ukraine.”
Meanwhile, the pound was cautious ahead of the last meeting of the Bank of England’s monetary policy committee on Thursday, where many are forecasting a 0.5% rate hike.
The pound was down 0.1% against the dollar at 1.227 and was also down 0.1% against the euro at 1.194 at the close.
Elsewhere in company news, JD Sports rose slightly despite accepting a cut-price sale for its Footasylum business.
Shares rose 1.2p to 130.75p at the close after it told shareholders it would sell Footasylum to the Aurelius Group for £37.5million, after competition regulators forced it to offload the retailer he originally bought for £90million in 2019.
Wealth management firm Quilter surged in the session after reports over the weekend that NatWest was considering a takeover.
Quilter shares rose 15.3p to 120.3p after the Mail on Sunday reported the banking giant was in the early stages of submitting a binding offer.
The price of oil suffered a sharp drop on recurring demand concerns, following a sharp price increase at the end of last week.
Brent crude oil fell 4.59% to US$99.2 a barrel as London markets closed.
The biggest risers in the FTSE 100 were Pearson, up 96p at 852.6p, HSBC, up 31.5p at 545.2p, Ocado, up 36.6p at 876p, Avast, up 15p at 480p, and Auto Trader, up 16.6p at 646.2p.
The biggest falls on the day were Melrose, down 8.75p to 151.8p, Anglo American, down 117.5p to 2,832.5p, Intertek, down 145p to 4,231p, Prudential, down 32 .4p to 973.6p, and IAG, down 2.6p to 116.14. p.