The British currency began the day higher but faltered.
The FTSE 100 ended the day higher on Wednesday while the pound was held back by Brexit worries following Theresa May’s desperate plea to Jeremy Corbyn to help end deadlock in Westminster.
London’s top flight closed up 27.16 points, or 0.37%, at 7,418.28p, crossing the 7,400 mark but underperforming its European peers.
David Madden, market analyst at CMC, said: “Equity markets in Europe hit a six month high, but the FTSE 100 underperformed. Stronger-than-expected services PMI reports from China and the eurozone, along with optimism surrounding US-China trade talks, boosted sentiment.
“The services industry reports from the euro-area helped shake-off the negative image of the currency bloc.”
In stocks, SSE closed in negative territory after the energy giant was fined £700,000 by regulator Ofgem for missing last year’s target to install gas smart meters for customers.
The watchdog said while SSE met its electricity smart meters installation target for 2018, the supplier only reached its gas target in February this year, less than two months after the deadline.
But the watchdog said it had decided not to take formal enforcement action against SSE, due to the steps SSE had taken.
Shares closed down 12p at 1,166p.
AA shares were up even as the roadside assistance firm blamed hefty investments for a dramatic decline in profit.
Profit before tax came to £53 million for the year to January, compared with £141 million a year earlier.
Full-year underlying earnings reached £341 million, in line with previous guidance. Revenue ticked up to £979 million.
Chief executive Simon Breakwell said the reduction in profits was down to a strategic investment in the group’s long-term prospects.
The company’s stock closed up 0.7p at 91p.
Sterling, meanwhile, had a mixed day. The British currency began the day in the ascendancy after Mrs May invited Mr Corbyn for crunch talks aimed at dealing with Brexit.
Following a surge on Tuesday night, the pound trimmed gains and stood 0.1% up versus the US dollar at 1.314. The pound was down by the same amount against the euro at 1.170 at the London market close.
“Sterling’s giddy start proved to be somewhat unsustainable, the enormity and urgency of what faces Theresa May (and now also Jeremy Corbyn) gradually eroding the currency’s Wednesday growth,” said Connor Campbell, financial analyst at SpreadEx.
The pound was also knocked by weak services data, which showed the industry in contraction for the first time since the Brexit vote.
The IHS Markit/CIPS UK services purchasing managers’ index (PMI) showed a reading of 48.9 in March, lower than the 51.3 recorded a month earlier. A figure below 50 indicates contraction.
In Europe, Germany’s DAX was up 1.7% while France’s CAC 40 rose 0.8%.
A barrel of Brent crude was trading 0.6% lower at 69 US dollars.
The biggest risers on the FTSE 100 were Taylor Wimpey up 7.8p at 187.05p, Persimmon up 79p at 2,241p, IAG up 18.6p at 528.6p and Paddy Power up 190p at 6,266p.
The biggest fallers on the FTSE 100 were Imperial Brands down 108.5p at 2.519.5p, Coca Cola HBC down 67p at 2,571p, Burberry down 40p at 1,934p and British American Tobacco down 59.5p at 3,119p.