Britain's economy shrank by 0.3 per cent during the first three months of this year, official data confirmed, leaving the nation in its second recession in four years.
Figures from the Office for National Statistics also showed that the economy contracted at a faster pace than previously thought in the final three months of 2011, by 0.4 per cent.
Meanwhile a two-day summit in Brussels on the Eurozone's calamitous finances is the focus of investor attention as leaders try to dig their way out of trouble.
On London's blue chip index Barclays was down more than three per cent as it was hit by a ruling that it had colluded to fix the interest rate at which banks lend to each other.
The bank must pay £290m in fines and its chief executive Bob Diamond is set to be hauled before parliament.
Also in banking RBS was down by more than one per cent as it continued to be dented by a computer glitch which affected thousands of customers at its NatWest bsuiness. In a dismal morning for the sector Lloyds nudged down by 1.8 per cent.
Meanwhile steelmaker Evraz was off by just over three per cent and miner Vedanta two per cent. Eurasian also dipped by 2.3 per cent.
Commodities giant Glencore was off by 1.5 per cent as it fights to win shareholder acceptance for its bid for Xstrata, which was down by 1.8 per cent.
Engineer IMI dropped 2.6 per cent making it one of the most significant fallers.
On the upside United Utilities advanced by 1.4 per cent and Severn Trent 1.2 per cent.
Outsourcer Serco added 0.8 per cent and pharmaceutical giant AstraZeneca 0.4 per cent.
Insurance buyout vehicle Resolution also inched up.
In Asia the Nikkei closed up 1.6 per cent while the Hang Seng shed 0.8 per cent.
Meanwhile UK housing data from Nationwide showed that house prices had slipped 1.6 per cent in June.
US first quarter GDP data will also be out later along with unemployment claims figures.