A strong showing from HSBC and the banking sector was not enough to steer the FTSE to gains on Monday.
Chinese anger towards the US over Nancy Pelosi’s Taiwan visit meant European markets were shaky despite an initially strong opening.
HSBC shook off nervousness in the Asian markets to close the day significantly higher after the banking giant came out fighting against calls by its largest shareholder for a break up of the banking giant as it claimed the move would be costly and risky.
The bank warned that a spin-off or demerger of its Asian business could jeopardise profits and growth, with the risk of hefty one-off costs, higher taxes, big running costs and possible regulatory issues.
HSBC finished 31.5p higher at 545.2p on Monday.
Nevertheless, the FTSE 100 ended the day down 10.01 points, or 0.13%, at 7,413.42.
Elsewhere in Europe, the German Dax decreased 0.03% by the end of the session while the French Cac decreased by 0.18%.
Michael Hewson, chief market analyst at CMC Markets UK, said: “It’s been a nervous start to the new month for markets in Europe with decent gains for financials after HSBC drew down the curtain on a positive first half for the UK banking sector, as a whole, against a backdrop of concerns in its core Asia markets.
“Away from those positives, European markets have fallen back from their intraday highs on reports that US House Speaker Nancy Pelosi would be landing in Taiwan tomorrow evening in defiance of Chinese warnings not to do so.
“This raising of tensions presents a bit of a problem for the US, especially given Russia’s aggressive behaviour in Ukraine.”
Meanwhile, sterling was cautious ahead of the latest Bank of England monetary policy committee meeting on Thursday, where many are predicting a 0.5% rate rise.
The pound was down 0.1% against the dollar at 1.227 and was also 0.1% lower against the euro at 1.194 at the close.
Elsewhere in company news, JD Sports moved slightly higher despite agreeing to a cut-price sale for its Footasylum business.
Shares were 1.2p higher at 130.75p at the close after it told shareholders it will sell Footasylum to Aurelius Group for £37.5 million, after competition regulators forced it offload the retailer it originally snapped up for £90 million in 2019.
Wealth management firm Quilter surged during the session after weekend reports that NatWest is considering a takeover.
Quilter’s shares rose by 15.3p to 120.3p after the Mail on Sunday reported the banking giant is in the early stages of putting down a firm bid.
The price of oil suffered a chunky fall over returning demand concerns, pulling back after a strong increase in prices at the end of last week.
Brent crude oil decreased by 4.59% to 99.2 US dollars per barrel when the 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 fallers of the day were Melrose, down 8.75p at 151.8p, Anglo American, 117.5p at 2,832.5p, Intertek, down 145p at 4,231p, Prudential, down 32.4p at 973.6p, and IAG, down 2.6p at 116.14p.