Concerns over the euro zone sent top shares into reverse on Wednesday after the previous session's sharp gains, as Italian lender UniCredit priced a rights issue at a huge discount, and a German bond auction failed to excite.
The FTSE 100 <.FTSE> fell 31.46 points, or 0.6 percent, to 5,668.45, albeit in light volume, at 79 percent of the 90-day daily average.
Banks knocked the most points off the FTSE 100 as worries surrounding the sector crept back in when UniCredit
Gerard Lane, strategist at Shore Capital, said there were
fewer worries surrounding UK-listed Barclays
And while the German 10-year auction was an improvement on a similar debt sale last November, which triggered fears Europe's debt crisis was spreading to its biggest economy, it was not enough to calm jittery investors.
I think there's just a bit of realism today, Angus Campbell, head of sales at Capital Spreads, said.
The ugly head of Europe has reared again. We've not had the best of auctions from Germany ... which has just reminded people that the overall euro zone crisis is still very much there and a huge threat to the economy.
The UK benchmark had on Tuesday lurched to its highest close since late October when traders, spurred on by positive data from the United States, Europe and China, had put cash to work at the start of the new year.
This was followed on Wednesday by encouraging domestic data, with British mortgage approvals rising to their highest level in almost two years in November.
Nevertheless, the euro zone debt situation still very much holds centre stage.
Martin Dobson, head of trading at Westhouse Securities, sees little in the way of catalysts to jolt the FTSE 100 out of the top of its trading range of recent months -- about 5,900 -- given the prerequisites to end the crisis have not been met.
Nobody's really got a fully-fledged plan that's going to be agreed by everyone ... I think it's (all about) getting actual working agreements (between the policymakers).
And I think the problem that you've got is an awful lot of governments are slim majorities and are always going to be pandering to the electorate rather than to the economic situation.
Retailers provided yet another downbeat focus for the market after a slightly cautious outlook statement weighed on Next's
As a likely outperformer, the Next statement does not set a positive tone for competitor updates, Peel Hunt said.
Marks & Spencer
Satellite pay-TV broadcaster BSkyB
BSkyB holds most of the rights to broadcast live matches in the UK.
(Additional reporting by David Brett; Editing by Helen Massy-Beresford)