Smart annotations in Pages app only lets me use the highlighter pen to mark-up

Trying to mark up some text in the Pages app on my iPad Mini 6 + stylus.

Highlighter pen works fine, but when I select any other kind of pen, eg pencil/crayon, the only option that comes up is 'tap anywhere with Apple pencil to add a drawing' which just opens up a separate box to draw in.

It won't let me write, or do things like underline/circle words etc.

What am I doing wrong?

I tried opening the doc in the Books app and I was able to use the full functions of the smart annotation tool there, but don't really want to do this in the Books app as it's not fit for purpose.

Alternatively, can anyone recommend a different app that would be ideal for marking up text (if Pages isn't the right one)?

Thanks.