The top share index fell back on Thursday, led by weaker banks and commodity shares as leaders of the world's biggest economies gather in France for a G20 summit set to be dominated by the threat of Greece collapsing out of the euro zone.
Eurogroup head Jean-Claude Juncker said on Thursday that the euro zone is working on a possible exit of Greece, saying it was essential that other members of the currency union would not be damaged in such an event.
The leaders of France and Germany, angered at Greece's shock move to call a referendum on its latest bail-out plan negotiated last week, told Prime Minister George Papandreou on Wednesday that Athens would not receive any more EU aid until it decides whether it wants to stay in the euro zone.
With the Greek referendum not due to be held until Dec 4, and a vote of confidence in the Greek government due on Friday which could throw that timetable out, markets are left with a very uncertain month ahead, and markets hate uncertainty, said Mic Mills, head of electronic trading at ETX Capital.
Falls by miners <.FTNMX1770>, energy issues <.FTNMX0530>, and banks <.FTMNX8350> accounted for over half of the FTSE 100 index's early morning decline as fears that Europe's debt crisis could unleash financial chaos prompted investors to shed riskier assets.
At 9:07 a.m., the FTSE 100 <.FTSE> index was down 19.05 points at 5,465.10, albeit bouncing off an early session low of 5,402.63, having closed 1.1 percent higher on Wednesday.
Aside from the euro zone debt concerns, investors also had a big batch of corporate earnings to digest on Thursday.
Life insurer Aviva
Insurance peer and fund manager Old Mutual
But RSA Insurance
Also on the upside, BT Group < BT.L> jumped 3.5 percent after unveiling better-than-expected core profits and sales in the second quarter.
And food ingredients firm Tate & Lyle
As well as watching events at the G20 summit in Cannes, investors were also focussed on Frankfurt, where the European Central Bank will hold its first policy meeting under new President Mario Draghi.
I think there is too much focus on
On the domestic data front, October's Markit/CIPS services PMI report, due at 9:28 a.m., is forecast to show a reading of 52.0, down from 52.9 in September.
(Additional reporting by Fracesco Canepa; Editing by Greg Mahlich)