The FTSE 100 Index failed to hold on to gains today as the European Union slashed its growth forecast for Greece from 2.5% to 0.5%.

Investors were spooked by the update amid efforts by the debt-laden country to negotiate access to much needed bail-out cash and avoid a potentially destabilising exit from the eurozone.

Traders returning to their desks after the Bank Holiday weekend had pushed London's top-flight above the 7,000-mark in the first half of the session but it ended the day 58.4 points lower at 6927.6.

European bourses were down sharply, with Germany's Dax and France's Cac 40 both off by more than 2%.

In New York, the Dow Jones Industrial Average was lower as figures showed the US trade deficit rose to a six-year high in March, swollen by imports that may have sapped the world's biggest economy of any growth in the first quarter.

The figures weighed on the US dollar, falling against the pound despite UK figures showing a sharp slowdown in the construction industry, denting hopes for a pick-up in pace for the wider recovery.

Sterling added a cent against the greenback to just under 1.52 while it was little changed against the euro at a slightly under 1.36.

HSBC dominated the corporate limelight after it reported a better-than-expected 4% rise in pre-tax profits to 7.06 billion US dollars (£4.7 billion) for the first quarter.

Chief executive Stuart Gulliver said the group had "recovered well" after a tough end to 2014 when it was weighed down by regulatory fines and saw annual profits fall by 17%.

But the stock fell by 3%, or 20.4p, to 625.9p. Shore Capital banking analyst Gary Greenwood said it was surprising to see the group's shares fall as the first quarter results were comfortably ahead of City forecasts.

He said: "Perhaps this reflects profit taking following a strong run into the results or perhaps it reflects scepticism about the sustainability of the beat."

Elsewhere in the sector, Lloyds had been boosted earlier in the session by an upgrade from Jefferies with a Royal Bank of Scotland also climbing, after a positive note from Nomura. But both headed lower amid the wider gloom later.

Lloyds closed 0.5p lower at 82.4p while Royal Bank of Scotland slipped 4.5p to 335.3p. Barclays shed 4.2p to 250.2p.

A rise in the price of oil, with a barrel of Brent crude heading above 68 US dollars, helped British Airways owner International Airlines Group end as the session's biggest faller. It dropped nearly 4%, or 20.5p, to 537p.

Outside the top flight, Greene King shares were 5p higher at 819.5p after like-for-like sales edged up 0.4% in the 51 weeks to April 26, hindered by comparatives against last year and the impact of new drink driving legislation in Scotland.

The biggest risers in the FTSE 100 Index were Coca-Cola HBC up 41p to 1417p, Fresnillo up 18.5p to 730.5p, Dixons Carphone up 7.8p to 425.9p and Sage Group up 7.5p to 496.5p.

The biggest fallers in the FTSE 100 Index were International Airlines Group down 20.5p to 537p, Imperial Tobacco down 109p to 3120p, Whitbread down 170p to 5050p and HSBC down 20.4p to 625.9p.