Britain's top shares index was a touch lower on Tuesday after sharp falls in the previous session with volumes low.
At midday British time, the FTSE 100 was down 0.1 per cent at 5,526.80 points, having slumped 2.1 per cent on Monday. Investors have been concerned about the ongoing Eurozone crisis, which is now clearly focused on Spain.
"After yesterday's volatility it may end up being a day of watching and waiting at these levels to see if any further proposed solutions are forthcoming - or if indeed there are more shocks from the troubled European countries," said David Jones, chief market strategist at IG Index.
Trading volumes were very thin, at 20 per cent of the 90-day daily average by midday.
Financial stocks, which are the most exposed to potential losses in debt-ridden euro zone countries such as Spain and Greece,were among the worst-performing stocks, with insurer Aviva topping the blue chip loser board, off 2.1 per cent, while Lloyds Banking Group shed one per cent.
"In general I am still cautious on banks and we are underweight in the fund," said Richard Plackett, manager of the BlackRock UK Special Situations Fund.
Miners, which had earlier posted a rally after data showed China’s flash factory purchasing managers index had risen in July to its highest level since February, soon saw that enthusiasm fade, with the sector hit by demands fears due to the weak economic backdrop caused by the European economic crisis.
The gloomy backdrop was illustrated by a weaker-than-expected German purchasing managers' survey on Tuesday, which showed private sector activity in Europe's largest country contracting for a third straight month.
City A.M. Reporter