BRITAIN'S FTSE 100 fell on Monday as the wounds inflicted by a sluggish global economic recovery refused to heal, following weak data from the U.S. and China in the past few days and ahead of the second-quarter earnings season.
London's blue chip index shed 21.32 points or 0.4 per cent at 5,969.26 by 1056 GMT.
The index extended Friday's 1.1 per cent fall and held below the key 6,000 level after jobs data from the United States which one trader described as "shockingly weak".
U.S. stock futures pointed to a lower Wall Street open with the June employment index due for release at 1400 GMT following on from Friday's non-farm payrolls.
Integrated oils retreated with the price of crude which dipped over 1 per cent as investors turned to the safe-haven qualities offered by the U.S. dollar and gold.
Miners fell too on concerns China's fight to cool its overheating economy would stifle demand from the world's largest consumer of raw materials.
The sector was also hit as Australia's unpopular government introduced a carbon tax scheme.
Credit Suisse's Paul McTaggart said the tax could lead to global miners such as Rio Tinto and BHP Billiton taking an earnings hit of up to 2 per cent.
Rio Tinto fell 0.2 per cent but BHP Billiton added 0.6 per cent as Peabody Energy and Arcelor Mittal launched a bid for Australian coal miner Macarthur Coal , assuaging some concerns the tax will impact the key mining sector.
And International Power bounced 4.6 per cent after dropping 6 per cent last week, as Espirito Santo Investment Bank said the tax proved fairly benign for the power generator.
EARNINGS, M&A SPUR
Investors will keep an eye on the U.S. second-quarter corporate earnings season which kicks-off with metals firm Alcoa Inc later on Monday.
Lothar Mentel, chief investment officer at Octopus Investments which manages 2.5 billion pounds ($4 billion), said a shift in focus to the next set of earnings should give investors the chance to focus on individual companies.
"A positive earnings reporting season, and a third-quarter rebound in global economic activity, should see equities make further gains," Mentel said.
FTSE 250 utility Northumbrian Water climbed 5.1 per cent after a takeover approach that could value the British water utility at 2.4 billion pounds ($3.9 billion).
"The prospect of M&A is likely to remain one of the main supports for equities," Jonathan Jackson, head of equities at Killik & Co, said.
He said UK infrastructure and utility assets could appeal to buyers looking for predictable cash generation at a time when rates of return on cash remain at historically low levels.
Utilities Scottish & Southern Energy and Centrica rose up to 0.7 per cent, while drugmaker Shire gained 1 percent, boosted too by their defensive qualities.
Jackson also highlighted BG Group , Tullow Oil and Premier Oil as potential bid targets.
BSkyB , however, extended recent falls, down 6.8 per cent to 699 pence in strong volumes, as the phone hacking scandal engulfing Rupert Murdoch's News Corp threatened to derail its takeover of the British satellite broadcaster.
Banks were weaker as investors braced for further developments in the European debt crisis and attempts to prevent debt contagion seeping out of Greece.
The FTSE 100 index has, however, still risen over 5 percent since touching three-month lows 12 days ago, driven mainly by hopes that Greece can avoid defaulting on its debts after recent votes to implement austerity measures.
