Banks lead FTSE 100 higher; airlines hit by Lufthansa warning

London's main stock index inched higher on Monday in line with marginal gains across Europe, as rises in banking shares outweighed the impact of a profit warning from Germany's Lufthansa on airlines.

The FTSE 100 index was up 0.1% by 0721 GMT, while the FTSE 250 midcap index gained 0.2%. With all eyes on Wednesday's U.S. Federal Reserve policy decision, the banking index broke a four-day losing streak, led by Asia-exposed banks including HSBC and Standard Chartered after Hong Kong's leader backed down over an extradition bill that has sparked mass protests.

British Airways owner IAG and easyJet both gave up around 3% on the main bourse after Lufthansa cut its 2019 profit outlook due to competition from low-cost rivals in Europe. Mid-cap component Wizz Air also dropped 4.4%.

Engineering services group Babcock added 3.5% after the company confirmed a media report that it had received and rejected a highly preliminary takeover bid from rival Serco earlier this year.