The FTSE 100 surrendered early gains on Monday, closing lower despite news of a US-Iran interim agreement. The blue-chip index ended down 41.10 points, or 0.4%, at 10,430.62, after having traded as high as 10,570.09 earlier in the session.
The FTSE 250 managed a modest gain, rising 36.91 points, or 0.2%, to 23,362.62. The AIM All-Share index outperformed, surging 17.96 points, or 2.3%, to 805.29.
London's equities initially rallied on reports that the US and Iran had reached a framework deal to reopen the Strait of Hormuz and begin 60 days of negotiations over Tehran's nuclear programme. However, enthusiasm waned as details remained scarce and the agreement has yet to be formally signed.
Russ Mould, investment director at AJ Bell, commented: "The framework deal is a major step forward to ending the conflict, although it is still not officially signed and remains light on detail. Markets seem cautiously optimistic there won't be any setbacks to getting it over the line, albeit investors are aware the narrative can change at the click of a finger. A full celebration is off the cards until the ink is dry on the deal."
Brent crude oil for August delivery fell sharply to $83.18 per barrel, down from $87.00 at Friday's close. Unsurprisingly, oil majors suffered, with BP declining 3.3% and Shell dropping 4.4%. Defence manufacturer BAE Systems also fell 4.7%.
Utilities were weak ahead of Thursday's Makerfield by-election, which could see Mayor of Greater Manchester Andy Burnham return to Westminster. If successful, Burnham is expected to challenge Prime Minister Sir Keir Starmer for leadership. Reports suggest a decade-long project to bring water and energy back into public control would be central to his agenda. Centrica fell 2.3%, SSE lost 1.0%, and United Utilities ended 2.7% lower.
London's underperformance contrasted with gains in European and US markets. In Paris, the CAC 40 rose 0.4%, and Frankfurt's DAX 40 climbed 1.1%. In New York, the Dow Jones Industrial Average gained 1.2%, the S&P 500 rose 1.7%, and the Nasdaq Composite jumped 2.7%.
Currency markets saw the euro trade higher at $1.1604, up from $1.1583 on Friday. The dollar eased slightly against the yen to 160.14 yen. Sterling strengthened to $1.3436, while edging lower against the euro to €1.1580.
US Treasury yields dipped, with the 10-year yield easing to 4.47% and the 30-year yield narrowing to 4.96%.
Gold prices rose to $4,354.54 per ounce, supporting mining shares. Fresnillo gained 6.6%, Endeavour Mining rose 7.2%, and Hochschild Mining surged 11%.
Investors now look ahead to UK inflation data on Wednesday and the Bank of England's rate decision on Thursday. Barclays forecasts headline CPI to accelerate to 3.0% year-on-year in May from 2.8% in April, with core CPI rising to 2.7%. The Bank of England is expected to leave rates unchanged at 3.75%, though chief economist Huw Pill dissented in April, favouring a quarter-point hike. Analysts believe Megan Greene may join him in calling for a rate increase.
On the corporate front, Bunzl advanced 0.6% after Bloomberg reported activist investor Elliott Investment Management built a near-5% stake and is pushing for a share buyback and strategic review of its North American arm.
Rolls-Royce surged 3.9% after securing two agreements for its small modular reactors. Swedish firm Videberg Kraft selected Rolls to supply three SMRs on the Varo peninsula, and the UK and Japan agreed to cooperate on advanced nuclear technologies, involving Rolls-Royce, the UK National Nuclear Laboratory, and the Japan Atomic Energy Agency.
On the FTSE 250, Vistry fell 7.1% after JPMorgan downgraded the stock to 'underweight' and slashed its price target to 210p from 430p. The Sunday Times also reported that the housebuilder is launching a voluntary exit scheme to cut jobs and preserve cash, following a pause in its share buyback programme.
Top FTSE 100 risers: Endeavour Mining up 276.00p to 4,106.00p, Fresnillo up 198.00p to 3,200.00p, Antofagasta up 246.00p to 4,290.00p, Weir Group up 120.00p to 2,444.00p, and Rolls-Royce up 50.40p to 1,358.40p.
Biggest fallers: BAE Systems down 90.50p to 1,820.50p, Shell down 140.00p to 3,080.50p, BT down 7.00p to 202.50p, BP down 17.50p to 517.00p, and Vodafone down 3.25p to 112.50p.
Tuesday's global economic calendar includes interest rate decisions in Australia and Japan, as well as retail sales and industrial production data from China. Local corporate events include a trading statement from SThree and full-year results from Accsys Technologies and Inspiration Healthcare.
