But the FTSE 100 Index pared back earlier losses, closing down 6.4 points at 5769.7, as Wall Street's Dow Jones Industrial Average pulled out of its two-day nosedive.
Figures revealing a better-than-expected rise in US consumer confidence helped turn the Dow Jones around, up around 0.3% in early trade, and offset fears of a drawn-out battle over the looming fiscal cliff, which will mean automatic tax increases and spending cuts from January 1.
In currency news, the pound fell to 1.25 euros after gains yesterday following the Bank of England's decision to hold off from further economy-boosting measures under its quantitative easing programme.
Sterling was also down at 1.59 US dollars as investors looked to the greenback as a safe haven from stock market turbulence.
Miners dominated the FTSE 100 fallers board, with Evraz off 6p at 236.4p and Anglo American down 18p at 1866p.
Banks and financial stocks were likewise under pressure, with Barclays off 6.5p at 230.2p, Royal Bank of Scotland down 4.3p at 270.1p and insurer Aviva off 4.9p at 325.4p.
Car insurance specialist Admiral was the biggest riser, up 3% or 35p to 1054p after Bank of America Merrill Lynch introduced a buy note on the stock. An upgrade also buoyed chemicals specialist Croda International, which added 61p to 2271p.
In corporate news, International Airlines Group was higher after unveiling details of a turnaround plan for ailing Spanish carrier Iberia.
The British Airways owner will cut 4,500 jobs, as well as reduce capacity by 15% and downsize Iberia's fleet by 25 aircraft, as it looks to revive the airline, which made losses of 262 million euros (£210 million) in the first nine months of this year.
Iberia's troubles and the impact of superstorm Sandy, which grounded flights into and out of the US east coast last month, mean IAG expects an operating loss of around 120 million euros (£96 million) this year.
Shares responded well to the restructuring announcement, lifting 2.6p to 170.6p or 2%.
Elsewhere, shares in Hornby recovered from earlier falls seen after the company swung to a half-year loss and pulled its half-year dividend.
The group said while sales of London 2012 goods such as model taxis and buses helped amid tough trading in the UK, performance of its Olympics range was weaker-than-expected and was not enough to prevent it reporting losses of £541,000, against profits of £959,000 a year earlier.
Hornby added that profit margins on Games-related products were low and it had put cash aside to cover unsold stock.
Shares initially fell 3%, but later clawed back to close 2.25p higher at 60.25p.
The biggest FTSE 100 risers were Admiral up 35p to 1054p, Croda International ahead 61p to 2271p, Tate & Lyle 17p higher at 747p and Smith & Nephew up 14p to 656.5p.
The biggest FTSE 100 fallers were Barclays down 6.5p to 230.2p, Evraz off 6p to 236.4p, G4S 5.8p lower at 253.4p and National Grid down 11p to 689p.