European stocks were in the red on Monday as rampant inflation, a wave of monetary tightening and a slowing global economy continue to cloud markets.
"It has been a generally gloomy day, with equities trimming their recent gains," Chris Beauchamp, chief market analyst at online trading platform IG said.
"But while the FTSE 100’s mining contingent is still sharply down on the day the losses in London have been trimmed, thanks to a strong performance from the utilities on hopes that the rise in gas prices will bolster their bottom line, even if they take a hit from opportunistic politicians looking for headlines."
The downbeat mood comes as the UK was rocked by political drama last week, which has seen prime minister Boris Johnson resign as leader of the Conservative party after more than 50 government resignations including former chancellor Rishi Sunak and health secretary Sajid Javid.
Since Friday, 11 Conservative MPs have thrown their hat in the ring as the Tory leadership battle heats up. So far, Sunak, Javid, new chancellor Nadhim Zahawi, Jeremy Hunt and foreign secretary Liz Truss are among the candidates.
"After a tumultuous start to 2022 the past month or so has seen global markets largely in limbo as investors seek to make judgements about whether any sort of soft landing for the economy can be engineered while still bringing prices under control," said Danni Hewson, investment analyst at AJ Bell.
"The FTSE 100’s outperformance compared to other global markets has started to falter as the commodity stocks that helped support its relative strength begin to run out of steam."
The pound (GBPUSD=X) fell 1.1% to $1.1894 against a strengthening US dollar ahead of a speech from Bank of England governor Andrew Bailey later on Monday. Sterling edged 0.1% higher to €1.18 against the euro (GBPEUR=X).
Meanwhile, the common currency suffered a brutal decline as Russia's energy cuts threaten to push the eurozone into recession. The euro (EURUSD=X) plunged closer to dollar parity, sinking as much as 1.3% to $1.005, its lowest level since 2002.
Across the Atlantic, US benchmarks opened in the red as traders watch earnings season for signs on how companies are weathering the inflation storm.
"The resilience of US markets last week was a welcome respite after the declines of the week before. Despite the buoyant tone of the last few days, they are about to face another big test later this week," said Michael Hewson, chief markets analyst at CMC Markets.
Asian markets were mixed overnight after Japan's Liberal Democratic Party clinched a strong win in Sunday's upper house election.
Tech stocks dragged the Hang Seng (^HSI) 3% lower in Hong Kong after China announced fines on the likes of Tencent (TCEHY) and Alibaba (BABA) as the firms failed to comply with anti-monopoly rules on transaction disclosures.
Richard Hunter, head of markets at Interactive Investor, said: "The latest spike in Coronavirus cases is also spooking investors, with data due later in the week likely to confirm a sharp contraction in the Chinese economy following a number of lockdowns over the past few months."
Chinese authorities announced that commercial and industrial businesses in Macao will be closed for a week in an effort to contain the spread of COVID-19, hitting casino stocks in particular.
The region has recorded about 1,500 coronavirus infections since mid-June, with around 19,000 people in mandatory quarantine, according to government figures.