FTSE 100 was solid this morning but the festering Eurozone crisis continued to sap confidence in riskier assets and banks were down as the government confirmed that they would be hit with the full impact of the Vickers Report.
But the agenda was dominated by the death of North Korean leader Kim Jong-il, sparking fears of regional instability which could have serious economic repercussions.
Financial markets fear the unpredictability of a leadership transition in impoverished, secretive North Korea.
Investors were also rattled by Fitch's warning that it may downgrade France and six other Eurozone countries as it believes a comprehensive solution to the region's debt crisis is "technically and politically beyond reach".
Meanwhile in London the latest quarterly changes took effect for the FTSE 100 index from the open, with Russian miners Evraz and Polymetal, and Irish building materials firm CRH joining the UK blue chips, while Lonmin, Inmarsat and Investec move down to the FTSE 250 index.
The biggest losers in early trading were banks who have been told that they will have to split their retail arms from their riskier investments as proposed in the Vickers report on banking reform. Lloyds dipped by 2.1 per cent and Barclays 1.6 per cent - the two top fallers in early trading.
Hedge fund giant Man Group was also down more than one per cent.
Tullow Oil and BP were both off by 1.3 per cent as the energy sector started weakly. On the positive side Imperial Tobacco lifted by 1.7 per cent, with Capital & Counties getting a 1.4 per cent boost after it announced a deal to develop a residential scheme near Earls Court.
Cruise ship giant Carnival was up by just over one per cent.
On the FTSE All-share online grocer Ocado fell by eight per cent after saying it had suffered from capacity problems.
However it forecast its earnings up by a quarter in the full year.
Struggling HMV was down 4.9 per cent after its results revealed widening losses.
In Asia the Nikkei closed down 1.2 per cent and the Hang Seng 1.1 per cent, while the South Korean Kopsi also dipped as the death of the North Korean leader spooked the region.