The London market trended lower as investors digested the prospect of a lengthy spell of political uncertainty in Germany.
Although chancellor Angela Merkel emerged as a clear winner, she has yet to find a willing coalition partner after her allies fared less well.
Max Cohen, financial sales trader at Spreadex, said: “With the Social Democratic party making clear their reluctance to form a coalition, the negotiations between the two main parties may not be as smooth as people had hoped, which could force some market jitters. Negotiations to form German governments usually last from four to six weeks.”
The FTSE 100 widened its losses throughout the day, to close 39.06 points lower at 6,557.37. Frankfurt’s Dax and the Cac 40 in Paris were also in the red.
Banks were among the biggest fallers, as they continued to be weighed down by comments from one of the US Federal Reserve’s policymakers on Friday that suggested an October tapering of stimulus is on the cards. Lloyds was down 2.3p to 73.9p and Barclays was off 7.1p at 266.3p.
Aberdeen Asset Management had initially bucked the trend, with shares jumping following a positive update which brokers said meant it had been relatively unscathed by recent turmoil in emerging markets. However the shares gave up most of their gains to close just 1.2p higher at 388.5p.
In the first day of trading since the latest FTSE shake-up, top flight debutantes Sports Direct and Coca-Cola Helenica were both under pressure. Sports Direct was down 1 per cent at 694p, while Helenica notched up its third day on the trot in the red, shedding 2.4 per cent to 1,825p.
Aberdeen-based Wood Group, which was demoted to the FTSE 250 following the quarterly review, slipped 1.9 per cent to 810.5p.