The FTSE edged down this morning, mirroring weaknesses in Asia, as rises in bond yields in Spain and Italy heaped more pressure on markets.
Italy sold three billion euros of five-year bonds at 6.29 per cent yesterday - a euro-era record.
The country's 10-year bond yields rose to 6.76 per cent, also pushing Spanish 10-year yields above six per cent for the first time since the European Central Bank started to buy the country's bonds in August.
A sharp rise in French bond yields also pointed to a growing risk that the two-year debt crisis may spread to one of the region's big two economies. French banks are among the biggest holders of Italy's more than two trillion euro public debt pile.
Meanwhile Eurozone GDP growth estimates out this morning showed that the bloc only grew by 0.2 per cent from July to September.
The German economy grew 0.5 per cent in the quarter and France expanded by 0.4 per cent. But struggling countries such as Spain held growth back.
Investors were also assessing the impact of UK inflation figures revealing that the rate had fallen to five per cent in October compared to 5.2 per cent in September.
The Consumer Price Index fell more than forecast as fuel and food cost rises slowed.
On London's blue chip index Barclays was down 2.4 per cent as the Eurozone debt crisis continued to drain confidence from the sector. Lloyds was off by 1.3 per cent and RBS 1.9 per cent.
But luxury retailer Burberry was the biggest faller, down more than four per cent. The drop came despite the company reporting a rise in first half profits and saying it was on track to deliver on full-year forecasts.
Analysts at Hargreaves Lansdown said the stock had suffered from investors selling to pocket profits after the company's recent strong run fuelled by Asian growth.
Energy companies and miners were also hit over fears of slowing world economic growth with Essar Energy down 2.4 per cent and miners Xstrata and Vedanta around 1.6 per cent.
British Land edged down by 0.7 per cent even though it issued figures showing that its net asset value had increased.
On the upside, the most significant riser was medical appliances company Smith & Nephew which put on more than one per cent. Retailer Next also nudged up 0.6 per cent and outsourcer Serco saw a slim rise.
In Asia the Nikkei closed down 0.7 per cent and the Hang Seng 0.8 per cent.
Across the Atlantic later US data includes October producer prices, the November Empire State index, October retail sales and September business inventories.