The FTSE 100 reversed early gains on Monday, closing down 27.26 points, or 0.3%, at 10,651.77 in muted trading conditions.
The FTSE 250 also edged lower, falling 34.58 points, or 0.2%, to close at 23,504.22, while the Aim All-Share bucked the trend with a modest rise of 0.3%.
Weakness in pharmaceutical giant AstraZeneca, which fell 2.5%, proved a significant drag on the index, with sector peer GSK also declining by 1.6%.
A soft gold price added to the negative sentiment, pulling gold miners Fresnillo and Endeavour Mining down 2.4% and 2.5% respectively.
UK construction data provided little comfort for investors, with the S&P Global UK construction purchasing managers’ index edging up only slightly to 38.4 in June from 38.2 in May, remaining well below the 50-point growth threshold.
Construction activity has now declined every month since January 2025, with June marking the second-steepest fall since the start of the pandemic.
Housebuilding recorded its sharpest downturn of the year, while civil engineering activity fell to its weakest level since April 2020.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said there are few signs of a “Burnham boost” to the mood music in the PMI, despite the incoming premier’s apparent emphasis on investment spending.
“We estimate that the headline activity index is consistent with construction sector output falling by around 3.0% three-months-on-three-months, the same signal as in May,” Mr Wood added.
The standout performer of the session was budget airline easyJet, which soared 9.3% on the FTSE 250 after announcing it had reached an agreement in principle for a takeover by US private equity firm Castlelake, valuing the company at over £5 billion.
Castlelake’s fifth proposal came in at 690 pence per share, which the Luton-based airline said it was “minded to recommend” to shareholders, provided a firm offer was made by August 3.
JPMorgan analyst Harry Gowers noted the offer price is close to the roughly 700p per share level at which shareholders might seriously consider engaging with Castlelake.
Mr Gowers said the key questions now around the deal are: will the ownership and control structure put forward satisfy the easyJet board and regulators; will a counter-bidder emerge; and, if a firm offer materialises, will the majority of shareholders vote in favour of the deal?
ITV dipped 0.1% after announcing it would return £950 million to shareholders following the agreed sale of its Media and Entertainment business to Sky, a wholly owned subsidiary of Comcast, for up to £1.6 billion.
Dan Coatsworth, head of markets at AJ Bell, said a “slimmed-down ITV would be an attractive takeover target for someone like Netflix looking to acquire production facilities and a rich library of content.”
“Equally, ITV could be an acquirer itself, making bolt-on deals,” he added, pointing to potential strategic flexibility following the divestment.
Across the Atlantic, the S&P 500 rose 0.7% and the Nasdaq Composite gained 1.2%, while the Dow Jones Industrial Average slipped 0.1%, with US markets returning after Friday’s Independence Day holiday closure.
US services sector data showed continued expansion in June, with the ISM services PMI registering 54.0, the 24th consecutive month in expansion territory, though down slightly from May’s figure of 54.5.
Analysts at TD Economics said the report “shows services demand still expanding, hiring improving and cost pressures easing gradually — a mix the Fed is likely to view as consistent with patience rather than a clear green light to move.”
Looking ahead, Tuesday’s calendar includes US and Canadian trade figures, Halifax house price data in the UK, a trading statement from Shell, and third-quarter results from polymer producer Victrex.