The FTSE 100 index of Britain's leading shares ended down 0.6 percent on Monday after commodities weighed, but M&A activity continued to provide some support. The FTSE 100 closed 35.2 points lower at 6,189.1 after a choppy day of trading saw the index dip in and out of negative territory.
Earlier in the session, the UK's leading index fell to a session low of 6,161.5 as credit-market concerns were heightened by Bear Stearns' comments that it was weathering the worst storm in financial markets in more than 20 years.
"It's been another choppy day for the London index, with stocks rallying off opening lows but failing to hold onto the gains as we approach the close," said Jimmy Yates, a trader at CMC Markets.
"The credit issues across the Atlantic are clearly a cause for concern, and with a number of high profile financial services companies reporting interim over the next few days, further exposure to the sector may well be seen in the near term."
On the M&A front, Belgian-Dutch financial group Fortis won overwhelming shareholder approval to raise 13 billion euros ($18 billion) to finance its part of a three-bank bid to buy ABN Amro.
Fortis, Royal Bank of Scotland (RBS) and Santander have offered 71 billion euros, mostly in cash, for the Netherlands' largest bank in a bidding war that has featured legal and stakeholder battles. Approval by Fortis shareholders of its proposed purchase of ABN Amro's Dutch operations and the rights issue gives the RBS-led consortium a boost.
RBS shares were 1 percent lower, while rival bidder Barclays added 0.3 percent. But insurer Standard Life topped the FTSE 100 leaderboard after recovering from early losses in late trade, as traders cited positive expectations ahead of its first-half sales numbers due on Tuesday.
Investor fears that it may become involved in Resolution's merger with Friends Provident also eased. Standard Life tacked on 3 percent, Resolution gained 0.2 percent, and Friends Provident was down 0.2 percent.
"The (Standard Life) stock has been weak for much of last week, and it fell quite a lot on Friday," one industry analyst said. "I would think expectations for the new business numbers are helping." Standard Life is expected to post a 26 percent rise in headline first-half sales, with UK sales up 34 percent.
In other individual stocks, ICI reversed larger gains to add 0.5 percent after it said it had opened its books to Akzo Nobel after receiving an improved 8 billion pound ($16.3 billion) take-over proposal from the Dutch rival. But on a quiet day on the economic calendar, traders struggled to find direction and will now look to the decision on interest rates from the US Federal Reserve on Tuesday.
Weaker metal prices dragged mining stocks lower; Lonmin, BHP Billiton, Rio Tinto and Kazakhmys all lost between 2.7 and 4.8 percent. London Brent crude fell towards $72 a barrel and pulled heavyweight oil stocks down, as concern about the United States economy rippled through financial and commodity markets.
BP lost 1.3 percent, and rival Royal Dutch Shell dipped 0.2 percent. Also on the downside, Punch Taverns dipped 3.4 percent as traders pointed to continued fallout from the global credit downturn, which could put at risk private-equity-led property deals.
Man Group, the world's largest-listed hedge fund, dropped 3.5 percent, while Anglo-US fund management company INVESCO slipped 3.2 percent on US market weakness because of its large exposure there, traders said. In the media sector, ITV tacked on 2.5 percent after Merrill Lynch lifted its recommendation on the stock to "neutral" from "sell".