Investors were cautious on Monday as they navigated the near certainty of a large rate hike from the US Federal Reserve and the continuing uncertainty resulting from the government's mini-Budget.
After a hotter-than-expected US jobs reading on Friday, it is almost certain that the Fed will continue its 75-point rate hikes. This will continue to strengthen the dollar and continue to make life difficult for investors. As the Bank of England confirmed its bond-buying programme would end later this week, the government did its best to calm market nerves.
The FTSE 100 index closed down 31.78 points, 0.5%, at 6,959.31. The FTSE 250 ended down 227.99 points, 1.3%, at 17,125.29, and the AIM All-Share closed down 10.59 points, 1.3%, at 799.63.
The Cboe UK 100 ended down 0.3% at 696.32, the Cboe UK 250 closed down 1.0% at 14,675.90, and the Cboe Small Companies ended down 3.25 points at 12,621.69.
In European equities on Monday, the CAC 40 in Paris ended down 0.5%, while the DAX 40 in Frankfurt ended marginally lower.
The pound was quoted at 1.1038 USD at the London equities close Monday, compared to $1.1130 at the close on Friday as the strengthening dollar continued to put downward pressure on sterling.
The Bank of England said it has doubled the size of a temporary bond-buying programme, which it kicked off following market turmoil after the UK government's mini-budget announcement last month.
The bank doubled the size of daily auctions to a maximum of £10 billion, from £5 billion before.
Following the announcement of the mini-budget last month, and the turmoil that ensued, the Bank of England decided to buy up long-dated UK government bonds, or gilts.
It confirmed that the scheme will end this week. Investors are concerned that the scheme's ending will contribute to market uncertainty, as the fundamental problem - the government's reckless fiscal policy - still remains.
In an attempt to calm the frayed nerves of the market, Chancellor Kwasi Kwarteng has agreed to set out his medium-term fiscal plan alongside Office for Budget Responsibility predictions on October 31.
The chancellor had been resisting setting out the details ahead of November 23 after he set out his multibillion-pound package of tax cuts to be paid for by borrowing.
The euro stood at $0.9700 at the European equities close Monday, down against $0.9779 at the same time on Friday.
Against the yen, the dollar was trading at JP¥145.72, up compared to JP¥145.15 late Friday.
Stocks in New York were lower at the London equities close, with the DJIA down 0.2%, the S&P 500 index down 0.6%, and the Nasdaq Composite down 1.0%.
In the FTSE 100, DS Smith shares jumped 12%. It was the best large-cap performer on Monday.
The packaging firm lifted annual guidance, hailing ‘effective cost mitigation’.
DS Smith expects adjusted operating profit of £400 million in the six months to October 31, up 45% from £276 million a year earlier.
For the full year, DS Smith's performance is ‘expected to be ahead of our previous expectations’.
In a positive read-across, Smurfit Kappa and Mondi added 6.7% and 4.2% respectively.
On AIM, Europa Oil & Gas closed down 42%. Alongside i3 Energy, it said it has abandoned a North Sea well after ‘disappointing’ drilling results in the Serenity field. The companies said that the SA02 well, in the Serenity field, was drilled to a total depth of 5,630 feet. While over 100 feet of other Captain sands was encountered, these were found to be water wet. The well will now be plugged and abandoned. i3 energy lost 11%.
In Tuesday's UK corporate calendar, there's a trading statement from Dechra Pharmaceuticals. There will also be full-year results from real estate investor PRS REIT, furniture and flooring retailer SCS Group and research and data analytics company YouGov.
Brent oil was quoted at $96.99 a barrel at the London equities close Monday, down from $97.09 late Friday.
Gold was quoted at $1,668.45 an ounce at the London equities close Monday, down sharply against $1,702.27 at the close on Friday.
In the economic calendar, there's UK retail sales overnight, and UK unemployment at 0700 BST, with comments from US Federal Reserve officials after the London market close.
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