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(Close): Shares in housebuilders and airlines led the market lower, with the FTSE 100 down 24.64 points at 6800.56.

Barratt Developments fell 9.8p to 350.80p and Persimmon was down 14p at £12.16 as speculation grew that rates will rise before the end of the year.

The Bank of England is also expected this week to announce measures to cool the housing market.

Airline shares were down on fears of higher fuel costs with oil prices being sent higher by the situation in Iraq.

Easyjet fell 29p to £14.23 while British Airways owner IAG slipped 4.7p to 379.9p.

Mining shares were among the top risers following signs of a recovery in China's manufacturing sector.

A survey indicated that China's manufacturing activity had picked up for the first time this year in June.

Among the miners, Rio Tinto rose 49.5p to £31.27 and BHP Billiton climbed 36.5p to £19.38.

In the FTSE 250, shares in energy services firm Kentz jumped by £2.26, or 32%, to £929p after Canadian firm SNC-Lavalin Group said it would buy the company for about £1.164bn.

Shares in online fashion retailer Asos dropped sharply at first, before recovering to stand 63p higher at £28.15.

Over the weekend, the company's main distribution centre was hit by a fire and Asos was forced to suspend its website. However, trading has now restarted and analysts do not expect any long-term disruption.

On the currency markets, the pound rose 0.06% against the dollar to $1.7024 and climbed 0.2% against the euro to 1.2530 euros.