LONDON: The pound recovered ground on Monday (Jan 21) after British Prime Minister Theresa May said she plans to return to Brussels to discuss changes to the Brexit deal she agreed with EU leaders last month despite an overwhelming rejection of the draft text by MPs last week.
The London stock market ended the day with the thinnest of gains, but still outperformed its European peers which all closed lower.
Earlier, Asian indices closed higher.
US markets were closed for a bank holiday, making for more modest trading volumes than usual in the rest of the world.
There was mixed news out of China, with official data showing the country's economic growth at its slowest pace in 28 years offsetting a report that the country has offered to eliminate its massive trade surplus with the United States - easing trade war tensions between the world's two biggest economies.
EXTENSION REQUEST 'MOST LIKELY'
Britain, meanwhile, is on course to crash out of the European Union on Mar 29 without a deal unless UK MPs can force a delay or come up with an alternative plan that Brussels is also happy with.
"Unless the British PM intends to commit political suicide, an extension request is the most likely scenario and the EU will most probably agree, which should be a positive development that will take the pound towards US$1.30 again," predicted Konstantinos Anthis, Head of Research at ADSS.
At the end of the European business day, the pound was trading at just above US$1.29.
"Of course, in the off chance that she doesn't request an extension or the EU rejects such a request, the pound will crash to US$1.25," he said.
In the event, May told parliament on Monday she believed "we can make progress" on the so-called Irish backstop, and that she would be consulting MPs about possible changes and "then take the conclusions of those discussions back to the EU".
Beyond updates from May, "markets are somewhat devoid of market moving events, with the Chinese data released overnight providing the basis for market sentiment outside of the UK today," said Joshua Mahony, senior market analyst at IG trading group.
Global stock markets had rallied on Friday, buoyed by hopes of a breakthrough in efforts to defuse a US-China trade war.
China's top economics negotiator is due to visit Washington this month for more talks as the end of a 90-day truce agreed between US President Donald Trump and his Chinese counterpart Xi Jinping draws closer.
"For now markets are going ahead with the growing perception that there is a lot of willingness by both parties to make a deal," said National Australia Bank senior strategist Rodrigo Catril.
"But ... the market is also likely to demand more concrete evidence that a deal looks more likely than not."
Key figures around 1645 GMT:
London - FTSE 100: UP 0.03 per cent at 6,970.59 points (close)
Frankfurt - DAX 30: DOWN 0.6 per cent at 11,136.20 (close)
Paris - CAC 40: DOWN 0.2 per cent at 4,867.78 (close)
EURO STOXX 50: DOWN 0.3 per cent at 3,125.07
New York - CLOSED for bank holiday
Tokyo - Nikkei 225: UP 0.3 per cent at 20,719.33 (close)
Hong Kong - Hang Seng: UP 0.4 per cent at 27,196.54 (close)
Shanghai - Composite: UP 0.6 per cent at 2,610.51 (close)
Pound/dollar: UP at US$1.2904 from US$1.2867 at 2200 GMT Friday
Euro/pound: DOWN at 88.12 pence from 88.29 pence
Euro/dollar: UP at US$1.1370 from US$1.1365
Dollar/yen: DOWN at 109.63 yen from 109.72
Oil - Brent Crude: DOWN 14 cents at US$62.56 per barrel
Oil - West Texas Intermediate: DOWN nine cents at US$53.95 per barrel