Political uncertainty in the eurozone resurfaced as the FTSE 100 index struggled to build on last week’s near three-month high.
Fears over Mario Monti’s announcement that he plans to resign as Italy’s premier were tempered after it emerged US president Barack Obama and house speaker John Boehner met on Sunday to resolve their differences.
The FTSE 100 Index closed up a modest 7.23 points to 5921.63.
US politicians now have three weeks to agree a budget deal to avoid the impending fiscal cliff, which if unresolved could see automatic spending cuts and tax rises introduced.
Rising factory output figures in China and the support of better-than-expected US jobs figures before the weekend also gave the Dow Jones Industrial Average a positive start today.
The pound was up against the euro at 1.23 after Mr Monti said he found it impossible to lead after the party of former Prime Minister Silvio Berlusconi dropped its support. The pound was also up against the US dollar at 1.60.
The biggest FTSE 100 risers were Associated British Foods up 21p to 1506p, Smith & Nephew ahead 12.5p to 678.5p, Kazakhmys 8.5p higher at 754p and Tate & Lyle up 10p to 769p.
The biggest FTSE 100 fallers were Hargreaves Lansdown down 19p to 716p, Eurasian Natural Resources off 6.8p to 276.2p, Aviva 6.6p lower at 359.7p and WPP down 9.5p to 860p.