The FTSE-100 Index was down more than 0.5%, or 34.3 points, to 6465.7 as it continued its downward slide following two successive weeks of losses.
Investors remain anxious over looming fears that quantitative easing in the US will begin to be tapered off from next month.
There were also falls in Europe, with Germany's Dax down 0.3% and France's Cac 40 slipping by nearly 1%.
This was despite better prospects on the continent, with the eurozone coming out of recession last week.
Craig Erlam, market analyst at Alpari, said: "The markets appear to be lacking any real direction at the moment, as improving data out of Europe continues to be overshadowed by increasing expectations that the Fed will begin winding down its asset purchase programme in September."
In London, beleaguered retailer M&S - where chief executive Marc Bolland is under pressure to revive flagging clothing sales after appointing a new fashion team - offered a ray of light on a gloomy day for the top flight.
Stars including Dame Helen, Darcey Bussell and Tracey Emin were among the "leading ladies" it recruited to promote its new clothing range in a fashion shoot by star photographer Annie Leibovitz.
The business is pinning its hopes on its autumn/winter collection to turn around the disastrous performance of its womenswear lines and investors gave its latest marketing effort the thumbs up, as shares lifted 6.2p to 459.5p.
Elsewhere there was a sell-off, led by mining stocks. Anglo American declined more than 3%, or 55p, to 1492.5p and silver miner Fresnillo dropped 15p to 1157p.
Commodities trader Glencore Xstrata also fell, on expectations it will write off up to £4.5 billion from the value of assets at Xstrata. Shares dropped 6.4p to 302p, ahead of results today.
Yesterday's weaker market sentiment came despite signs of a pick-up in deal activity.
Nasdaq-listed vacuum products specialist Edwards, which is based in Crawley and employs 3200 people, is to be bought by Swedish firm Atlas Copco in a £1bn deal.
And oil and gas engineering firm Kentz said it was the subject of takeover interest from two parties, Amec and Germany's M+W.
Kentz rejected Amec's latest approach, which valued it at between £673m and £691m, after turning down another attempt last month. It also spurned an approach from Stuttgart-based M+W, which it said was worth less than Amec's.
The developments fuelled a rise in Kentz's share price of 24%, or 115.1p, to 591p. Amec was 1p higher at 1085p.