Banking shares took a hit in early trading after ratings agency S&P issued a fresh warning over the Greek debt crisis.
S&P said Greece would be likely to default if it follows a debt rollover plan in which French banks would allow the country to pay back its debt to them over decades.
Investors were also digesting comments in a PwC report which suggested that UK high street banks had suffered a dip in confidence triggered by falling business volumes.
Meanwhile Britain's construction industry lost some steam in June with the Markit/CIPS construction PMI index easing to 53.6 points from 54.0 points in May.
On the FTSE 100 RBS was down 1.8 per cent, with Lloyds and Barclays both losing 1.7 per cent. HSBC stocks slipped around 0.5 per cent.
Asia-focused Standard Chartered dropped 1.2 per cent after its private equity arm announced that it had bought a slice of Indian firm Redington, while insurer Admiral also edged down.
On the positive side Essar Energy rose 1.18 per cent while data expert Experian lifted by one per cent.
Luxury retailer Burberry gained 0.9 per cent while software company Autonomy put on around one per cent after Espirito Santo Bank issued an upbeat note on its potential.
Vodafone was up 0.4 per cent after announcing a long-awaited deal to buy out its partner Essar from their Indian mobile joint venture for $5.46bn.
Meanwhile Credit Suisse issued a note forecasting a pick-up in the telecoms sector with BT Group, Vodafone and Inmarsat mentioned.
Temporary power provider Aggreko was up one per cent after Citigroup raised its earnings forecasts on the company.
Asian equities climbed a fifth consecutive session today, led by Chinese stocks. The Shanghai composite index closed up 1.6 per cent while Tokyo's Nikkei stock average climbed above 10,000 for the first time in two months.
In major European corporate news Volkswagen clinched a 55.9 per cent stake in truckmaker Man.