By Georgina Prodhan and Helen Reid
LONDON (Reuters) - UK stocks fell to a 10-week low on Thursday, weighed down by energy stocks and consumer staples as sterling edged higher on a glimmer of hope in Brexit talks.
BP closed down 1.2 percent and Shell down 1 percent.
Sterling rebounded slightly but remained near an eight-day low as many doubted whether British officials would be able to break through a deadlock before a crucial EU summit next week.
"We remain in somewhat of a stalemate position," wrote Deutsche Bank (DE:DBKGn) strategist Jim Reid, adding however that he believed "the prior deadline of achieving a breakthrough this week now seems more flexible".
Talks between Northern Ireland and Britain on the post-Brexit future of the Irish border continued, leaving open the possibility of a deal by the end of the week that would allow Brexit talks to move to the next phase.
The pound traded 0.2 percent higher at $1.3425 by 1607 GMT.
Aside from Babcock International, which went ex-dividend, consumer staples were among the largest decliners, with Associated British Foods (LON:ABF) down 2.3 percent and British America Tobacco down 1.4 percent.
Pearson (LON:PSON) was the top blue-chip gainer, up 2.2 percent after JP Morgan raised its target price for the company in its 2018 European media outlook.
Ladbrokes Coral (L:LCL) jumped 29 percent as Bookmaker GVC Holdings offered to buy it for up to $5.2 billion to create an online and high-street betting giant in the latest consolidation of the gambling market.
"Ladbrokes Coral has stuck out like a sore thumb as the next obvious target in an ongoing round of gambling sector consolidation," said Lee Wild, head of equity strategy at Interactive Investor.
GVC was holding back part of the final payout until the results of a UK government review of highly addictive fixed-odds betting terminals (FOBT), which investors feared would dent the stocks, was complete.
"If FOTB stakes are cut to 2 pounds, the deal will be worth nearer 3.1 billion pounds than 3.9 billion pounds," said Wild.
GVC rose 5 percent, also pulling fellow betting-shop chain William Hill 8.1 percent higher.
Small-cap equipment hire group HSS Hire jumped 13.3 percent after it announced additional cost savings.
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