Markets stabilised on Monday in the absence of dramatic new Brexit developments, but analysts said the mood remained “tense”.
The pound, which last week experienced its worst one-day fall since June 2016, was less volatile.
Sterling was 0.1% higher against the US dollar at 1.285, but down 0.14% versus the euro to 1.123.
Fiona Cincotta, senior market analyst at City Index, said: “Brexit headlines continued to fuel volatility in the pound on Monday as traders watched and waited.
“May was attempting to drum up backing for the Brexit deal, this time from business leaders, whilst dissenters from her party attempted to draw together enough support for a leadership challenge.
“With insufficient letters submitted so far for a vote of no confidence, Theresa May is still clinging onto power.”
Meanwhile top-flight London stocks slid into the red, amid losses on global markets.
The FTSE 100 fell 12.99 points, or 0.19%, to close at 7,000.89.
David Madden, market analyst at CMC Markets UK, said: “Markets have given up some ground as we approach the close of the session. Uncertainty in relation to Brexit, and the Italian budget deficit are weighing on sentiment.
“There hasn’t been any major developments in relation to Brexit, but the situation is still tense.”
In Europe, the French Cac was down 0.79%, while the German Dax dropped 0.85%.
London’s blue-chip index was weighed on by housebuilders after the release of disappointing house prices data.
Barratt Developments fell 11.1p, or 2.21%, to 491.9p, while Persimmon was down 22p, or 1%, at 2,106p.
In corporate news, outsourcer Mitie announced it will offload its social housing business to Mears Group in a deal worth up to £35 million.
Mears will take control of Mitie Property Management and MPS Housing for an initial payment of £22.5 million and then up to £12.5 million payable dependent on certain performance milestones.
Mining giant BHP Billiton ended a long-running dispute with the Australian taxman over the sale of raw materials through an offshore entity.
The agreement with the Australian Tax Office (ATO) covered a dispute stretching back to 2003 and will see BHP fork out 529 million Australian dollars (£368 million) covering the 2003–2018 period.
Shares in CYBG, dropped by 6.2p, or 2.44%, to 248.4p following news that hundreds of small businesses are to press ahead with a £350 million legal action against CYBG over claims they were miss-sold loans.
The group also announced the departure of its chief operating officer Debbie Crosbie. She is to take up the role of chief executive at TSB, which is owned by Spain’s Sabadell, as the crisis-hit bank looks to move on from an IT meltdown which caused chaos for thousands of customers.
A barrel of Brent crude was down 1.3% at 66.12 US dollars following oversupply concerns.
The biggest risers on the FTSE 100 were Fresnillio up 29.20p to 894.2p, Lloyds Banking Group 1.33p to 55.83p, 3i Group up 14.20p to 809.6p and Severn Trent up 31p to 1,854.50p.
The biggest fallers on the blue-chip index were Ashtead down 80p to 1,798p, Johnson Matthey down 123p to 2,877p, Just Eat down 21.20p to 533.80p and Smurfit Kappa down 76p to 2,226p.