The FTSE share index edged lower early on Wednesday after sharp gains in the previous session, with falls in banks and the retailers, after Next's Christmas trading update, offsetting further gains in oil-related stocks.
London's blue-chip index <.FTSE> was down 2.29 points at 5,697.62 by 0908 GMT, having soared 2.3 percent on Tuesday after upbeat economic data from the United States, Europe and China boosted risk appetite.
UK-listed banks <.FTNMX8350> were the top fallers as nervousness crept in after Italy's UniCredit
We're less worried about Barclays
HSBC was the top faller in the sector, down 1.2 percent.
Retailers came under pressure after Next
As a likely outperformer, Next statement does not set a positive tone for competitor updates, Peel Hunt said.
UK high street retailer Marks & Spencer
Analysts said Next's trading update came broadly in line with expectations but its outlook was mixed.
That prompted Numis to downgrade the firm to add from buy.
Espirito Santo and Guardian Stockbrokers said they expected some forecast downgrades following the soft guidance from the company.
Next have to try and demonstrate double-digit growth is sustainable, and this is where the challenges lie, and we prefer other names in this space, said Atif Latif, director at Guardian Stockbrokers.
Valuation is a concern, too, with the shares having easily outperformed the sector and the broader index in 2011, up more than 38 percent.
Guardian's Latif said Next had hit its upside price objective of 2,815 pence, and he sees downside risk, given the recent outperformance.
Espirito estimated the shares trade on 10.3 times its 2012 earnings per share (compared to about 10 times for the FTSE 100) and are up with its 2,800 pence target price.
On the upside, integrated oils <.FTNMX0530> were the top gainers as the price of oil remained around recent highs of $102 a barrel. BG Group
Investors continued to like the defensive attractions of the sector -- reliable dividends, strong balance sheets -- given the tough global growth outlook.
Consensus is forecasting mid-single-digit percent top-line growth and double-digit profit growth. We believe that this will be difficult to achieve, broker Davy said in a note.
2012 therefore could be another year of earnings downgrades. In this environment, careful stock picking in defensive sectors is likely to be the key to outperforming the market.
On the data front, November Bank of England consumer credit and mortgage lending figures will be released at 0930 GMT, together with December's Markit/CIPS construction PMI.
And investors will watch on Wednesday for an auction of 10-year German government bonds to see what the market's appetite is for euro zone-related government debt.
(Additional reporting by Jon Hopkins; Editing by Will Waterman)