Mining stocks were sharply higher after new figures showed Chinese manufacturing expanded for the first time this year.
But the FTSE 100 Index was still 24.6 points lower at 6800.6 after militants captured new territory in the west of Iraq.
With oil prices falling on the conflict and the effect of a French air traffic control strike, airline stocks were back under pressure as International Airlines Group fell 4.7p to 379.9p and easyJet dropped 29p to 1423p.
Housebuilders were near the top of the fallers board on expectations that Bank of England governor Mark Carney will announce new rules this week to clamp down on large and risky mortgage loans. Barratt Developments fell 9.8p to 350.8p and top flight rival Persimmon dropped 14p to 1216p.
Other fallers included Royal Bank of Scotland, which dropped 7.2p to 330p, while Lloyds Banking Group was 1.3p lower at 75.5p.
The pound continued to hold on to gains based around speculation that the Bank will become the first major economy to hike interest rates. Sterling was down slightly against the dollar at 1.70, after US manufacturing data was better-than-expected. The pound was up against the euro at 1.25.
Elsewhere in London, the latest figures from the world's second largest economy lifted hopes that recent stimulus measures by Beijing authorities were starting to have a positive impact.
The potential boost to demand meant Rio Tinto was 49.5p higher at 3127p and BHP Billiton lifted 36.5p to 1938p.
Outside the top flight, Asos shares held firm despite the major fire at its Barnsley warehouse on Friday night.
The blaze affected 20% of stock but Asos said it was able to resume taking orders at 2am on yesterday. The company is fully insured for the loss of stock and business interruption. Shares were initially 3% lower but later steadied at 2815p - a rise of 63p - after Citi said the disruption was likely to be short term. The session also saw the market debut of the AA motoring organisation, which priced its shares at 250p in a flotation enabling the exit of its private equity owners.
In conditional dealings, the stock fell as low as 231p in a performance echoing last month's sale of shares in over-50s holidays and insurance company Saga, which was also part of Acromas Holdings. The stock closed down 18p at 232p.
The biggest risers on the FTSE 100 were Intercontinental Hotels up 63p at 2368p, BG Group up 31p at 1270.5p, Arm Holdings up 19p at 908p and BHP Billiton at 36.5p at 1938p.
The biggest fallers were Rolls-Royce down 32p at 1053p, Johnson Matthey down 85p at 3015p, Barratt Developments down 9.8p at 350.8p and CRH down 43p at 1579p.