The FTSE began to slip this morning as investors digested the impact of a new Eurozone agreement over fiscal integration which was shunned by Britain.
Britain torpedoed the chances of a consensus as Prime Minister David Cameron refused to accept plans for a financial transactions tax that would clobber the City.
Three French banks were downgraded by Moody's - BNP Paribas, Societe Generale and Credit Agricole - highlighting the depth of the problems still facing lenders exposed to the sovereign debt crisis.
The FTSEurofirst 300 index of top European shares was up 0.4 per cent as Eurozone leaders clambered to convince investors that the bloc was intent on staving off financial disaster in the future - with or without Britain in the fold.
Meanwhile in a glimmer of hope for the domestic economy, Britain's trade deficit narrowed at its fastest pace since records began in October, as the value of exports hit a record high, official data showed.
But the blue chip index lost ground after early gains, with insurer Aviva off by 1.4 per cent along with pharmaceutical giant Shire.
The poorest performer among banks was HSBC, which edged down by just over one per cent. Drinks giant SABMiller was down by a similar level.
Meanwhile resources companies performed the most solidly in choppy trading.
Essar Energy was the biggest climber, up 2.5 per cent, while oil company BG Group lifted by 1.8 per cent. In banking, Lloyds and Barclays were both up more than 1.5 per cent.
Meanwhile miner Eurasian was the last of the top five climbers, nudging up 1.5 per cent.
In Asia the Nikkei closed down 1.7 per cent and the Hang Seng 2.7 per cent. In corporate news there, Toyota halved its profit forecast after its output was hit by floods in Thailand.