Shares were little changed on Thursday as consumer confidence edged higher and Italian political risk seemed to recede.
The FTSE 100 was down by 11.37 points or 0.15% at 7,678.20 by the closing bell, while the pound was little changed, trading up by 0.03% against the dollar to 1.32912 and by 0.06% on the euro to 1.1398.
London's second-tier index on the other hand managed to eke out a 0.11% or 23.59 point advance to 20,846.26.
In the background, traders were waiting on the release of the next monthly US jobs report, on Friday.
Concerns around Italy's political situation eased a touch, or at least were put on hold as Lega and the Five Star Movement were given another chance to form a government, said market analyst Neil Wilson at Markets.com, though any such government faces a clash with the European Union and bond markets if they push ahead with plans to increase debt.
Investors were also keeping tabs on the reaction to the White House's US decision not to extend a waiver on tariffs for steel and aluminium imports from Canada, the EU and Mexico, together with the continuing negotiations with respect to Nafta and China trade.
London's benchmark index would be higher were it not for the stronger sterling and oil prices withdrawing from recent highs, said analyst Artjom Hatsaturjants at Accendo Markets. "Markets were no longer in panic mode, having digested the fallout from Italy's cabinet crisis. With European and German inflation accelerating closer to ECB's 2% target rate, markets were in forward-looking mode, trying to assess impact of potential future policy changes."
On UK policy, and possibly helping the pound, Theresa May was being urged by several former ministers in her own party for a 'sensible' Brexit deal, with intra-party talks to try to create a consensus for a 'pragmatic approach' to the issue. A group of European business leaders also met the Prime Minister to warn her that time is running out to secure a "frictionless" trade deal and that they were considering to withdraw investment given current uncertainty.
Elsewhere, consumer confidence in the UK edged higher, consultancy GfK reported, with an increase of two points to -7 for May that bested the consensus forecast of -8. Nevertheless, Joe Staton, client strategy director at GfK, said: "With UK retail sales falling at their sharpest rate since the mid-90s, tough trading conditions for Britain's hard-pressed retail sector continue to take their toll. Shoppers are still not showing signs of a willingness to splash-the-cash. Will this self-imposed austerity remain the hallmark of pre-Brexit Britain in the run-up to March 2019 and beyond?"
Meanwhile, mortgage lender Nationwide's latest house price data revealed a slowdown in the rate of home price gains from a 2.6% clip for the year to April to 2.4% in May. That was well beneath the 3.0% rise that economists had penciled in.
Bank shares were mostly in the red as the Financial Conduct Authority fired a warning shot over the way overdrafts are charged, announcing measures intended to save consumers up to £140m a year and calling for fundamental reform of the sector. Following an 18-month review of high-cost consumer credit, the FCA is proposing introducing mobile alerts to warn of potential overdraft charges, stopping the inclusion of overdrafts in the term “available funds” and making it clearer that overdrafts are credit, among other measures.
Chemicals producer Johnson Matthey rose after it reported flat underlying profits and raised the dividend 7%.
Building materials group CRH climbed as it began a shake-up of its business, as it looks to merge European and US divisions and boost profits.
Changes to the FTSE 350 index were confirmed after the latest quarterly review, with Ocado and GVC Holdings promoted to the FTSE 100 and Mediclinic and G4S dropping down into the FTSE 250, where they are to be joined by Integrafin, Laird, Energean Oil & Gas and Premier Oil. Demoted from the 250 will be Pets at Home, Marstons, Woodford Patient Capital Trust and Purecircle.
FirstGroup skidded lower after boss Tim O'Toole stepped down with immediate effect after the transport operator swung deep into the red after writing down the value of various assets on its balance sheet, especially its Greyhound unit. The company also booked a £106.3m onerous contract provision for the Trans Pennine Express, as a result of management's excessively optimistic assumptions when it bid for the contract.
Greeting cards, dressings and gifts retailer Card Factory reported quarterly like-for-like sales down 0.4% against strong comparatives and a tough retail environment. The group said it was continuing its store roll out, with 10 net new stores opened, keeping it on track for its target of 50 openings for the full year.
Shares in Indivior were hit after the drug developer was subpoenaed by the California Department of Insurance over its Suboxone treatment for opioid addiction.
Legal & General was little moved after announcing that Mark Zinkula, chief executive officer of its investment management arm, had advised the board of his intention to retire from the company in August next year.
Going ex-dividend on the day were Britvic, Computacenter, Ferrexpo, Marks & Spencer, National Grid, On The Beach, Spire Healthcare (hitting major shareholders Mediclinic), SSP and Taylor Wimpey.
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