Britain's FTSE 100 index ended down 0.26 percent on Monday, as a looming interest-rate decision and public security concerns dented sentiment, but mining stocks rose as bid talk lifted Lonmin. Travel and leisure stocks suffered after British police hunted for members of a suspected militant cell.
Which had rammed a burning jeep into a Scottish airport and tried to detonate two car bombs in London. British Airways and easyJet, which fell 1.4 and 1.9 percent, respectively, were also hurt by Brent crude oil prices holding above $71 a barrel. Oil major Royal Dutch Shell added 1.6 percent and BP also rose. The FTSE 100 ended down 17.3 points, or 0.26 percent, at 6,590.6.
On Thursday the Bank of England is expected to raise interest rates for the fifth time in a year as it battles to curb price pressures in Britain's fast-growing economy. A Reuters poll shows 56 of 70 economists expect interest rates to rise to 5.75 percent, and almost half reckon rates will hit 6 percent by the end of the year.
"I don't think anybody's got a good idea of where interest rates will actually peak," said Neil Parker, market strategist at RBS Financial Markets. "We're all fumbling around a little bit at the moment trying to decide on whether what's happening with the UK economy is a positive or a negative," he added.
"And equally we're not confident of whether the US recovery is going to be sustained or not. The US does set the tone a lot." All FTSE miners rose, with Lonmin gaining 4 percent and topping the index as traders cited talk that its mining peer Xstrata may make a 50 pounds-per-share bid for the company, traders said.
Xstrata declined to comment, while Lonmin was not immediately available for comment. Xstrata added 2.4 percent, Rio Tinto put on 3 percent and Anglo American jumped 2.6 percent. Financials were the day's biggest losers, as interest rate worries lingered. Alliance & Leicester lost 0.9 percent, Lloyds TSB dropped 1.1 percent and HSBC fell 0.9 percent.
Northern Rock fell 2.1 percent after ING cut its price target to 1,048 pence from 1,296 pence. Royal Bank of Scotland shed 1.4 percent after a group led by Irish financier Derek Quinlan bought the 42-storey tower in London's Canary Wharf financial district owned by the bank and used by Citigroup as its European headquarters.
The transaction price is 1 billion pounds ($2.01 billion), in what would be the second-biggest UK property deal. Barclays fell 0.6 percent after it said Dutch market regulator AFM had agreed an extension so an announcement on the availability of its offer document for ABN Amro could take place on or before July 23.
Property shares also dipped on rate worries, traders said, with a negative sector note from HSBC on Friday also dragging the sector down. Hammerson was down 1.5 percent and British Land dipped 1.9 percent.
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