The FTSE 100 Index slid 49.7 points to 5810.8, with all but two stocks from the top flight in negative territory.
As well as a sharp rise in borrowing costs in Spain, where police have clashed with protesters demonstrating against austerity cutbacks, investors were spooked by a member of the US Federal Reserve casting doubt on the effectiveness of the central bank's stimulus efforts.
The fallers board was led by RSA Insurance, which declined 4.25p to 114.45p, while Royal Bank of Scotland was off 7.7p to 262.3p and Anglo American eased 46.75p to 1853.75p.
In corporate news, Domino's Pizza shares came off the boil after a recent strong run, declining 30.75p to 532.25p.
Despite a 3.7% rise in third quarter like-for-like sales in the UK, shares were lower as investors noted a slowdown in its performance compared with the first half year.
There was also a fall of 15% for waste management business Shanks after it said results for the 2013 financial year will be slightly below current market forecasts. Shares were off 13.7p at 76.5p.
The pound at 10am was 1.6182 dollars compared to 1.6231 dollars at the previous close. The euro at 10am was 0.7953 pounds compared to 0.7975 pounds at the previous close.