The FTSE 100 index of Britain's leading shares ended up on Monday but gave up some earlier gains after a report showed weaker than expected US factory activity in March, rekindling concerns about the US economy.
The Institute for Supply Management said its indicator of factory activity fell to 50.9 in March, down from 52.3 the month before and below forecasts for 51.1. A reading above 50 marks expansion in the sector.
Among individual sectors, oils fell as benchmark crude oil prices dropped below $66 a barrel, pulling back from a rally that added $10 in little over a week, despite Iran's continuing detention of 15 British sailors providing some support.
BP lost 0.8 percent and rival Royal Dutch Shell dipped 0.6 percent. Uncertainty over the US economy and falling metal prices also hit miners, with Antofagasta down 1.7 percent, Kazakhmys shedding 1.4 percent and Lonmin dipping 1.7 percent.
The FTSE 100 ended 7.5 points, or 0.1 percent higher at 6,315.5 with many investors keeping an eye on the Bank of England's two-day interest rate meeting starting on Wednesday.
"The main driver has been this continued political stand-off between Iran and the UK, which is obviously helping to impact on the oil price," said Jeremy Batstone, head of private client research at Charles Stanley Stockbroker.
"The other major highlight was the release of the ISM data in the US which we've recovered from quite quickly but the initial reaction was to send both the US and UK markets into negative territory." There is a strong chance that UK interest rates will rise again this year but probably not until May, when the Bank of England has its latest inflation forecasts to hand, economists said in a Reuters poll.
The poll of 60 economists showed only 11 are expecting the UK base rate to rise by 0.25 percentage points to 5.5 percent at the April 5 Monetary Policy Committee meeting. On the upside, telecommunications shares got a boost after news that US phone company AT&T and Mexican cell phone operator America Movil had entered talks to buy stakes in a company that controls Telecom Italia for about 4.8 billion euros.
BT Group climbed 2.1 percent, while Cable & Wireless added 2.5 percent, with the latter also completing a 25-year sale and leaseback agreement with British Land on a portion of its property portfolio.
Under the deal, which covers nine properties used as network sites in the UK, Cable & Wireless will receive 88 million pounds ($174 million), the telecoms company said in a statement. British Land ended the day up 2 percent.
Elsewhere, Experian Group, Britain's credit information firm, added 3.3 percent, boosted by Kohlberg Kravis Roberts's $29 billion purchase of credit-card and payment processor First Data Corp, traders said.
The First Data deal is the second-largest buyout ever, behind KKR and Texas Pacific Group's take-over of TXU Corp in terms of size. British Airways climbed 2.7 percent, as traders mulled what the company's next move might be after Spanish airline Iberia received a 3.4 billion-euro bid approach from Texas Pacific Group on Friday.
Strategists and traders were questioning whether British Airways, which owns a 10 percent stake in Iberia, will increase its stake, make an alternative bid or work in partnership with TPG. On the downside, Britain's biggest brewer Scottish & Newcastle shed 2 percent as the standout loser, despite J.P. Morgan upping its rating from "underweight" to "neutral".
Traders said talk of a possible bid from Dutch rival Heineken, which had seen its shares surge as much as 15.4 percent last Thursday, had fallen away with profit-taking replacing. "(The) weekend press was suggesting that there isn't an obvious acquirer after Friday's bid speculation," one trader added. Among midcaps, Britain's biggest care homes firm Southern Cross Healthcare tacked on 7.1 percent after it said it was performing ahead of expectations and that it had struck a deal to add a further 29 homes to its estate.