London's FTSE 100 slipped on Monday as investors ramped up bets of a quicker interest rate hike by the Bank of England, while gaming company Playtech soared after a 2.1-billion-pound takeover offer by Australia's Aristocrat Leisure.
The blue-chip FTSE 100 index ended 0.4% lower, marking its worst session in nearly two weeks, with healthcare and travel-related shares leading declines.
Investors bet that the BoE plans back-to-back interest rate rises for its November and December meetings, with more to come next year, after BoE Governor Andrew Bailey signalled the central bank would act to curb inflation expectations.
"Markets are pricing in tighter policy because the energy crunch could prompt a dramatic U-turn on interest rate policy at the Bank of England," said Laith Khalaf, head of investment analysis at AJ Bell.
"There does certainly seem to have been a significant shift in rhetoric coming from the Bank, but there may yet be some prevailing factors which push an interest rate rise into next year."
Softbank-backed online retailer and tech group, The Hut Group, rose 20.5% after saying it would remove its founder's "golden share" and seek a place on the premium segment of the main stock market.
FTSE 100 bounces to pre-pandemic levels on gains in energy, bank stocks
A survey of chief financial officers at top British companies found that they expect supply chain problems in the UK to persist for at least another year and consumer price inflation to still be above 2.5% in two years' time.
Supply worries and rising energy costs have slowed the pace of gains on the FTSE 100 recently and led the benchmark index to underperform developed market peers in Europe and the United States.
Investor sentiment also took a hit after data showed China's economy grew more slowly than expected in the third quarter, clouding the global recovery outlook.
The domestically focussed mid-cap index inched 0.1% lower with airlines Wizz Air Holdings and Easyjet being the top decliners.
Gaming software supplier Playtech Plc soared 58.1% to become the biggest gainer on the mid-cap index, after Australia's Aristocrat Leisure Ltd said it will buy the company for 2.1 billion pounds ($2.89 billion).
British transport group National Express and its takeover target Stagecoach Group dropped 3.8% and 3.2%, respectively, after the regulator extended the deadline until Nov. 16 for National Express to make a firm offer.