news from the US Federal Reserve, with banks and miners the biggest fallers.
The Fed appears set to debate pumping billions of dollars more into the sluggish US economy, but is likely to hold off any action while it takes further readings on the health of the recovery.
The FTSE 100 closed down 26.35 points, or 0.5 per cent, at 5,576.19, well off the session high of 5,635.72. It had gained 1.7 per cent on Monday, when the index closed at its highest level since late April.
FTSE volumes were light, however, at just 70 per cent of their holiday-thinned 90-day average.
Banks, which enjoyed good gains in the previous session, edged back as investors became jittery awaiting the outcome of the Fed policy-setting meeting.
Royal Bank of Scotland, HSBC and Lloyds Banking Group shed 0.7 to 1.3 per cent.
“It’s understandable to see investors being reluctant to continue buying stock that might lose value overnight if the U.S. markets get a nasty surprise and drop dramatically,” Angus Campbell, head of sales at Capital Spreads, said.
US residential construction rose more than expected in August to a four-month high, suggesting the embattled housing market was starting to stabilise.
Miners, which had also bounced on Monday, fell along with base metal prices.
Kazakh miner ENRC was the biggest decliner in the sector, down 2.7 per cent as it spent $670m to expand its presence in Brazilian iron ore and further diversify into another emerging market, Latin America.
Oil service companies were heavily sought after FTSE 250 firm Wellstream Holdings said it had received several bid approaches.
Blue-chip players AMEC and Petrofac gained 0.8 per cent, while Wellstream shares
jumped more than 28 per cent.
Mid-cap peers in the sector John Wood Group and Hunting climbed 6.6 and 3.1 per cent respectively.