Britain's top share index was lower Monday morning, following weakness overnight in Asia after news North Korean leader Kim Jong-il had died, sparked concern over regional stability.

Investors were also unnerved by Fitch saying it may downgrade France and six other euro zone countries as a comprehensive solution to the region's debt crisis was technically and politically beyond reach.

The FTSE 100 <.FTSE> was down 8.79 points, or 0.2 percent, at 5,378.55 by 9:26 a.m., in choppy trade, with low volumes exacerbating moves. The index fell 0.3 percent Friday.

Following the news of Kim Jong-il's death, South Korea, still technically at war with North Korea, placed troops and all government workers on emergency alert, with the government saying there was no sign of unusual North Korean troop movements.

Financial markets fear instability in northeast Asia because of the unpredictability of a leadership transition in impoverished, secretive North Korea.

Traders were unsure about what might prove a draw for investors, many of whom will be looking to square positions as December grinds on, as jitters surrounding Europe's debt situation drain risk appetite.

With credit rating downgrades, ongoing sovereign debt issues and uncertainty in the Korean peninsula, it is difficult to see where the upside will come from in what is a traditionally strong week, Manoj Ladwa, senior trader at ETX Capital, said.

Banks <.FTNMX1770> were among the biggest drags on the index, under pressure ahead of finance minister George Osborne's formal response to proposals laid out in September by the government-sponsored Independent Commission on Banking.

Britain will give its full backing to proposals to shake up the country's banks, forcing lenders to form barriers between their retail operations and riskier investment arms to protect customers better in any future crisis.

Royal Bank of Scotland , reported by the Sunday Telegraph to be considering closing more than half its investment bank as it prepares an overhaul of the business, was among the top fallers, off 1.8 percent.

Barclays shed 1.6 percent and Standard Chartered slipped 0.5 percent.

Uncertainty is the keyword this morning, with especially the death of the North Korean leader a big surprise, and while it might be positive long term, short term anything can happen, said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million (323 million pounds) of assets.

Liquidity is going to disappear quickly in the run-up to Christmas.

Retailers were bracing themselves for the final festive trading week against the backdrop of harsh conditions on the high street, with consumers squeezed by debts and high prices.

Entertainment retailer HMV , grappling with waning demand in its core CD and DVD markets, sank 7 percent as it posted a wider first-half loss and said it faced a battle to stay in business.

Seymour Pierce halved its target price for HMV to 2.5 pence, repeating its sell rating.

Blacks Leisure slid 12.5 percent, with hopes of a formal takeover bid for the outdoor clothing and equipment retailer fading as rival retailers and buyout firms see a pre-pack administration as the only viable solution for the indebted group, the Financial Times reported.

(Additional reporting by Jon Hopkins; Editing by Dan Lalor)