The top share index edged lower on Tuesday, with investors taking profit on banks and cyclicals after Greece secured a long-awaited bailout deal that averted the immediate risk of a messy default but offered no long-term panacea.
London's blue chip index <.FTSE> closed down 17.05 points, or 0.3 percent at 5,928.20, retreating from a seven-month closing high it reached on Monday on expectations for the Greek deal and posting its biggest daily drop in seven sessions.
Having risen 6.5 percent since the start of the year, bolstered by liquidity injections from global central banks and improved risk appetite, the FTSE is approaching overbought territory on the relative strength indicator (RSI).
If we go down 2 percent from here, that will be a good healthy correction. We are not going to go back to unchanged on the year - there is too much money about, all that QE (quantitative easing) liquidity, said Justin Haque, pan-European equity sales trader at Hobart Capital Markets.
Low turnover underlined investors' cautious mood, with volumes on the FTSE 100 coming in at 93 percent of the 90-day average.
Euro zone policymakers agreed a 130 billion euro (108.7 billion pound) rescue for Athens, enabling it to meet bond payments due in March.
With the widely expected deal done, investors switched their focus to the remaining deep doubts about Greece's ability to recover and avoid a default in the longer term, as well as risks of contagion to other countries.
It (the Greek deal) does not change my view at all, said Francesco Curto, CROCI strategist at Deutsche Bank.
We all know that it is not going to take three months or six months to solve Greece, but ultimately it seems that within Europe you are managing to confine the problem.
Curto favours a defensive value strategy, focusing on companies with low price-earnings ratios, which also offer relatively high cash returns, low financial leverage and low volatility, like pay-TV group BSkyB
Shell was one of the few gainers on the FTSE, up 0.8 percent, as higher oil and metal prices boosted energy firms <.FTNMX0530> and miners.
The latter also benefited after Deutsche Bank raised earnings forecasts within the sector to include upgraded base metal price expectations for 2012.
Improved economic data in the U.S., a growing sense that a resolution in Europe is not too far off and expectations that China will avoid a hard landing have all lent to a low-volume drift upwards in metals prices, Deutsche Bank said, forecasting that the trend would continue throughout the year.
Banks were the biggest weight on the FTSE, with Barclays down 1.3 percent
Cyclical companies, which do well at times of economic strength, also suffered with International Airlines Group
Higher prices and muted wage growth are taking their toll on UK consumers, with Asda
U.S. investors, who missed out on Monday's global stocks gains due to a public holiday, came in as buyers in the afternoon, sending Wall Street higher <.SPX> and helping Europe's bourses trim some of the losses towards session-end.
(Additional Reporting By David Brett; Editing by David Cowell)