POLITICAL gridlock in Washington left European markets in the red amid disappointment over the lack of progress in resolving America's budget crisis.
The FTSE 100 Index was down by over 50 points during the session but it recovered ground to close 16.6 points off at 6437.3.
Following a poor run in Asian stock exchanges overnight, markets in France and Germany also dipped. On Wall Street, the Dow Jones Industrial Average was in negative territory as well.
The falls come as the impasse on Capitol Hill shows no signs of resolution, after the US was last week forced to limit government operations when Congress failed to approve short-term funding to allow the nation to pay its bills.
A potentially more worrying stalemate looms over raising the administration's debt ceiling or borrowing limit, with a deadline of October 17.
In the latest blow, Republican speaker John Boehner has ruled out a vote on raising the ceiling without the need for concessions from President Barack Obama.
The crisis helped sterling make gains against the dollar, rising one cent to 1.61 US dollars, while it was flat against the euro at 1.19 euros. Among stocks on the blue-chip risers board, Rolls-Royce gained after it announced an order from Japan Airlines to buy 31 Airbus A350 aircraft, which are powered by its Trent engines.
Rolls shares rose 4p to 1119p as the order represented a shift in Japanese aviation as carriers traditionally favour Airbus rival Boeing. The order is also good news for Rolls staff at Derby, where the company employs around 11,000 people.
Retailer Marks & Spencer was one of the biggest fallers in the top flight after Credit Suisse scaled back its full-year forecasts after the second quarter of the financial year had been slower than expected in clothing.
It believes general merchandise margins will have come under pressure due to higher markdowns over the summer and an earlier mid-season sale. M&S shares have enjoyed a strong run in recent weeks but fell back nearly 3% or 13.7p to 480.3p.
Other stocks from the retail sector were also under pressure, with Next down 60p at 5030p and Sports Direct 30.5p cheaper at 674.5p.
Cranswick, which supplies bacon and sausages to supermarkets including Tesco and Sainsbury's, has been hit by record pig prices, which have offset strong turnover growth in the fresh pork and bacon categories.
Panmure Gordon cut its forecast for full-year operating profits by 6% to £50million but said it maintained its forecast for the following year.
The biggest FTSE 100 risers were Fresnillo, up 18p to 931.5p, Aviva up 7.8p to 422.6p, ITV up 3.3p to 181.8p and Aggreko up 26p to 1468p.
The biggest FTSE 100 fallers were Sports Direct down 30.5p to 674.5p, easyJet down 37p to 1260p, Marks & Spencer down 13.7p to 480.3p and Travis Perkins down 45p to 1640p.
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