The FTSE 100 was dragged down by weak commodity stocks and banks in early trading as investors cut their exposure to riskier assets on uncertainty over whether the US Federal Reserve will launch more stimulus measures.
Minutes from last month's Fed meeting showed the world's biggest economy would have to worsen further before the central bank took any more easing steps.
Weak miners were the main drag on blue chip sentiment as copper prices edged lower.
Key China GDP data is to be released tomorrow, offering more clues as to the state of the global demand.
Fund manager Ashmore Group was the biggest individual blue chip faller, down 4.7 per cent, as it reported a fall in the amount of money it manages in its fourth quarter after weak performance and the exit of clients saw it lose more than a fifth of its equity assets.
Security giant G4S was the second biggest loser on the index falling more than three per cent after the UK government said the company had failed to provide thousands of security staff for the Olympics. The firm's lucrative contract with the government is now being put under the spotlight.
Meanwhile the weakness in the mining sector was underlined by Anglo American, Rio Tinto and Polymetal, which were all down by more than two per cent.
In banking Lloyds was down one per cent and RBS 0.7 per cent. Barclays, which has been rocked by the Libor rigging scandal, was off by 0.9 per cent.
The biggest riser on the blue chip index was broadcaster ITV which lifted by 1.6 per cent. In a positive morning for the media sector BSkyB rose 0.8 per cent while advertising giant WPP edged up by 0.8 per cent.
Insurer Old Mutual put on 0.4 per cent and Admiral just over one per cent.
On the FTSE 250 Premier Oil was up three per cent after announcing that it was pumping another $1bn into oil exploration in the Falklands.
Shares in marketing group Aegis soared by 45 per cent after Japanese firm Dentsu said it had agreed to pay £3.2bn for the British company.
Meanwhile on Asian markets the Nikkei closed down 1.4 per cent and the Hang Seng 1.9 per cent.