The blue chip FTSE 100 index closed down 0.6 percent at 7,293.50 points, slightly underperforming the broader negative European market.

On Friday, Republican leaders pulled legislation to overhaul the U.S. healthcare system, a 2016 election campaign promise of Trump and his allies, putting into question Trump's ability to deliver on his other promises, such as tax reform.

The rally in global equity markets since Trump's election has been driven by a reflation trade, on the hope for increased infrastructure spending and tax cuts.

"The agenda is quite badly dented now – (Trump has) got a lot of consensus building to do," Ken Odeluga, market analyst at City Index, said.

"That’s going to delay his ability to be really, really effective in terms of pushing through tax reform and pharmaceuticals reform and certainly will delay coming back for another bite of this healthcare reform," Odeluga added.

The FTSE's mainly foreign-earning stocks were also hit by a stronger pound which jumped almost 1 percent to an eight-week high against the dollar, gaining with other major currencies after the policy flop.

British miners were among the biggest large cap fallers, with Glencore, Anglo American and Antofagasta all dropping between 3.9 to 4.7 percent as the price of copper slipped for a second day. [MET/L]

Among the handful of risers, Astrazeneca was up 0.9 percent after it won approval for its lung cancer pill Tagrisso in China, a key market.

Berenberg's downgrade on Lloyds to "sell" from "hold" sent the shares 1.6 percent lower, with analysts saying the bank is riskier than perceived and that risks

from cyclical loan losses are highly skewed.

Babcock International also declined, down 4.3 percent after the engineering outsourcer said it had reached a mutual agreement with the UK to terminate the Magnox nuclear decommissioning contract in 2019.

Outside of the blue chips, shares in car dealer Inchcape rose 4.7 percent after BNP Paribas upgraded its rating on the stock to "outperform" from "neutral".

"The macro backdrop has improved and there would now look to be upside risk to the demand environment," said BNP analysts. "Currency has turned from a headwind to tailwind. Management have iterated a credible self-help programme to support earnings progression. M&A has moved from optionality to reality."

Exova was a top small-cap gainer, posting its best ever daily gains, up 14.2 percent after the materials testing firm said it got proposals for cash offers from firms including Element Materials Technology, PAI Partners and Jacobs Holding AG.

(Reporting by Kit Rees; Editing by Janet Lawrence/Ruth Pitchford)

By Kit Rees and Helen Reid