Top shares fell in thin, choppy trade on Monday as scepticism about the ability of European politicians to come up with an effective plan to solve the region's debt crisis dampened investor appetite for risk.

The euro zone debt crisis is firmly on the agenda on Monday when German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Berlin, although market observers expected little of significance to emerge.

We've seen so many meetings where politicians have overpromised and underdelivered, I think it's probably right that markets should remain sceptical, and there are still some tremendous issues that need to be resolved within the euro zone, Henk Potts, market strategist at Barclays Wealth, said.

Traders eyed monetary policy announcements from the European Central Bank and the Bank of England on Thursday, with investors keen to hear ECB President Mario Draghi's latest take on any action to ease the debt crisis.

GlaxoSmithKline was the heaviest faller in London, down 3 percent and accounting for most of the FTSE 100's slide, after it announced plans to file its key, once-a-day, inhaled lung treatment Relovair for regulatory approval in mid-2012, following the release of clinical trial results.

Relovair, being developed with U.S.-based Theravance , will be filed for chronic obstructive pulmonary disease (COPD) in the U.S. and Europe in the middle of the year.

Trading volume in Glaxo was relatively strong, at 54 percent of its 90-day daily average.

GSK has ... clearly seen enough to warrant regulatory filings globally in COPD, Shore Capital said in a note.

However, the data are probably not as clean as we would have liked and although the lack of superiority versus (its twice-daily drug) Advair probably has little relevance to approvability, we believe that it could limit its commercial positioning.

The UK benchmark <.FTSE> was down 12.63 points, or 0.2 percent, at 5,637.05 by 12:31 p.m., having flipped in and out of positive territory, with volume at only 31 percent of its 90-day daily average.

The index enjoyed a solid start to the year, advancing 1.4 percent last week when encouraging U.S. data outweighed concerns over Europe.

Darren Sinden, trader at Silverwind Securities, identified 5,700 -- a level the index failed to hold above last week -- along with three-month highs at 5,747, as resistance points for the FTSE 100.

(Investors) will take some comfort from the golden cross (an indication a bull market is around the corner) between the 20 and 200-day exponential moving average lines that was posted on Friday, he said.

It remains to be seen if this is a lagging indicator reflecting (last) Tuesday's sharp rally, rather than a portent of what is to come.

With volatility expected to remain elevated in 2012 as the euro zone debt crisis rumbles on, Deutsche Bank strategists said dividends remain an attractive alternative to simply being long in equities.

They recommend buying the 2013 dividend futures because they offer greater upside potential, and price-in very bearish scenarios.


The retail sector was thrust into the spotlight as Wm Morrison Supermarkets and HMV's Christmas trading updates got the thumbs-down from investors, ahead of seasonal reports from the UK's biggest retailers this week.

HMV shed 6.7 percent as the music, DVD and gaming retailer's update did little to improve sentiment towards the firm, which last month warned it could go out of business. It also owns live music venues.

Panmure Gordon said: HMV remains in a very difficult position, despite the expected strong last week's trade (before Christmas).

We think that it needs to sell Live and 7digital but, with doubts remaining about the group's going-concern basis, it is some way from being an equity story.

Morrisons saw its shares dip 0.3 percent after its trading update which, according to Killik & Co, was disappointing, with sales for the six weeks to January 1 below consensus expectations.

Other British retailers, including Tesco and Marks & Spencer , are set to report Christmas sales figures this week, throwing into focus the impact of heavy discounting on profit margins and prospects for consumer spending in 2012.

Britain's store groups engaged in a frenzy of promotions and price cutting in the run-up to the festive season, reminiscent of the start of the recession in 2008.

Royal Bank of Scotland bucked a weak sector trend, as JPMorgan Cazenove upgraded the part-state-owned lender to neutral from underweight on hopes for the sale of its Global Banking & Markets (GBM) business.

We believe that a restructuring of GBM operations at RBS to scale back capital and cost intensive businesses is likely to be negative for revenues but accretive to longer term returns, JPMorgan said in a note.

(Additional reporting by David Brett and Jon Hopkins; Editing by David Hulmes)