The FTSE 100 closed lower on Monday as housebuilders retreated on weak mortgage data and Babcock International shares tumbled sharply.
The blue-chip index ended the session down 23.80 points, or 0.2%, closing at 10,484.22, while the FTSE 250 fell 132.34 points to 23,014.85.
European markets mirrored the cautious mood, with the CAC 40 in Paris and the DAX 40 in Frankfurt both ending the day down 0.2%.
US markets fared better, with the Dow Jones Industrial Average rising 0.4%, the S&P 500 gaining 0.6%, and the Nasdaq Composite climbing 1.0% higher.
Oil prices edged upward after the US and Iran exchanged fire over the weekend, disrupting shipping through the vital Strait of Hormuz, though a ceasefire was subsequently agreed.
Brent crude for August delivery climbed to 72.85 dollars a barrel, up from 71.49 dollars on Friday, reflecting the elevated geopolitical tension in the region.
Russ Mould, investment director at AJ Bell, said the scale of the oil price hike “wasn’t as bad as it could have been”, although investors “will want greater reassurance that the ceasefire is lasting and not a flash in the pan”.
Sterling strengthened during the session after Andy Burnham outlined policy plans in his first major speech since launching a bid for the Labour leadership, which could see him become prime minister.
Mr Burnham promised to give the UK a “new direction” with the biggest transfer of power out of Whitehall in modern times, a commitment that helped settle market nerves.
Barclays noted the most telling detail from a market perspective was Mr Burnham’s commitment to the existing fiscal rules, stating: “There was no sense of trying to find ways to game the rules or increase borrowing, which would have worried markets.”
The pound traded at 1.3247 dollars on Monday afternoon, up from 1.3216 dollars on Friday, while sterling also firmed against the euro to 1.1597 from 1.1588.
Bank of England data showed that UK mortgage borrowing slowed sharply in May, with net borrowing of mortgage debt by individuals falling to £2.9 billion from £4.4 billion in April.
Net mortgage approvals for house purchases dropped to 56,200 in May from 66,000 in April, falling well below the FXStreet consensus forecast of 63,000 and marking the lowest level since December 2023.
RBC Capital Markets analyst Anthony Codling warned that “the sharp monthly reversal is a warning shot”, noting that mortgage approvals typically feed through to housing transactions with a three-to-four-month lag.
Codling added: “For housebuilders juggling the trade-off between pricing and volume, this data nudges them back towards caution.”
On the FTSE 100, Persimmon shares fell 2.5% and Barratt Redrow slid 2.2%, while on the FTSE 250, Vistry sank 4.2%, Taylor Wimpey lost 2.5%, and both Bellway and Berkeley Group dropped 2.1%.
Babcock International led the FTSE 100 fallers, with shares plunging 5.2% amid reports the Government had dropped plans for an advanced warship that the defence group had been vying to develop.
British American Tobacco fell 0.7% after confirming its Fit2Win transformation programme remains on track, with the initiative expected to deliver around £600 million in annual cost savings by 2028.
BAT said it expects the efficiency programme to result in a reduction of around 5,500 roles globally by the end of the year, excluding the United States, which is not within the scope of the programme.
Bridgepoint Group was among the session’s standout performers on the FTSE 250, surging 16% after announcing a deal to acquire Kayne Anderson Real Estate for 1.39 billion dollars, taking its assets under management to around 120 billion dollars.
The acquisition, which involves 759 million dollars in cash and 189 million new shares worth 634 million dollars, is expected to boost earnings per share by more than 20% in 2028 once completed.
Gold’s weakness pressured miners, with Fresnillo and Endeavour Mining falling 3.0% and 2.9% respectively, as the yellow metal slipped to 4,023.68 dollars an ounce from 4,085.63 dollars on Friday.
Tuesday’s economic calendar brings GDP figures from the UK and Canada, inflation data from France and Germany, and trading statements from J Sainsbury and Cake Box.