By Muvija M and Shashwat Awasthi
(Reuters) - London's blue-chip index squeezed out gains on Monday as banks got a boost from comments about a possible Brexit delay, while housebuilders were hit by reports the government was worried about Persimmon's handling of a state house-funding scheme.
The FTSE 100 closed 0.1 percent higher, lagging other major European bourses where investors took comfort from U.S. President Donald Trump's decision to delay raising tariffs on Chinese imports.
The more domestically-focussed midcaps shed some early losses to end down 0.1 percent.
"There is a fear in the financial market that if the UK leaves the EU without a trade deal, interest rates in the UK are likely to go down ... the slightly improved situation in relation to Brexit is helping the banking stocks," said CMC Markets analyst David Madden.
Lloyd's of London insurer Hiscox (LON:HSX), which recently joined the FTSE 100, added 3 percent after reporting a profit for the year that beat market expectations.
The pound gained after European Council President Donald Tusk said delaying Brexit beyond the planned March 29 exit date would be a "rational solution" as there was no majority in the British parliament to approve a divorce deal.
Sterling's rise briefly pulled the exporter-heavy FTSE 100 into the negative territory.
Homebuilders suffered their worst day in a month on reports Britain's housing minister is pressing Persimmon (LON:PSN) on how it operates a public funding scheme for new house buyers.
Persimmon slid 5 percent on the main index, pulling down rivals Taylor Wimpey (LON:TW) and Barratt.
Bunzl (LON:BNZL) fell 4 percent after the company said its margins remained under pressure from rising costs, even as its full-year profit beat expectations.
Primark owner Associated British Foods (LON:ABF) fell 2 percent after guiding to flat first-half earnings. The company's finance chief separately said it was "unbelievable" the British government was contemplating a no-deal Brexit.
Prime Minister Theresa May has put off a parliamentary vote on her Brexit deal until March 12, which lawmakers see as a tactic to get more of them to back her plan - already rejected once - in an attempt to avoid a split from the EU without an agreement.
"Maybe she is thinking some MPs who don't like her deal may like it in two weeks time when there is very little time left on the clock," said Madden.
Also weighing on markets were data from the Confederation of British Industry showing the country's services industry was its gloomiest since the 2009 financial crisis, due to the "unmistakably negative" impact of Brexit uncertainty.
Centamin slumped nearly 30 percent - its worst one-day fall in more than six years - as its annual gold production fell and a 2019 production forecast missed Jefferies' estimates.
Bucking the trend, sub-prime lender Provident Financial (LON:PFG) rose 3.5 percent after rejecting an unsolicited takeover offer from smaller rival Non-Standard Finance (NSF). NSF slumped 6.7 percent.