The FTSE 100 Index closed 64.2 points lower at 5722 as general strikes in Spain and Portugal and walkouts in Greece and Italy kept the eurozone debt crisis at the forefront of investors' minds.
Figures revealing the first fall in US retail sales for four months - in part due to the effects of superstorm Sandy - also dampened the mood.
There was a further hit to sentiment after Bank of England governor Sir Mervyn King gave a gloomy economic outlook for the UK as the Bank slashed its growth forecast to around 1% next year.
The pound fell against the US dollar and euro after the Bank said inflation would fall back towards target by the end of 2013.
In a busy session for corporate news, solid results from supermarket Sainsbury's failed to inspire further share gains.
The chain, which increased half-year underlying profits by 5% to £373 million, slipped back 8.4p to 338.8p, having made decent headway in the year to date.
There were losses for other retailers, including Marks & Spencer down 6.8p to 378.4p, B&Q owner Kingfisher off 5.9p at 283p and Burberry 51p lower to 1180p.
The focus of investors was also on the energy sector after results from Southern Electric owner SSE and German utility giant RWE.
A revised earnings forecast from E.ON knocked confidence yesterday, but this was offset by RWE saying it now expects to "at least match" last year's pre-tax and operating earnings figures.
Centrica shares were 7.5p higher at 318.3p, while SSE edged 17p higher to 1400p after it reported a 38% increase in half-year profits to £397 million, helped by a return to the black for its energy retail business. It also increased its dividend by 5% to 25.2p a share.
Elsewhere in the top flight, ITV shares moved higher after the broadcaster yesterday enjoyed its biggest one-day bounce since 2009 following a strong trading update. Shares were up another 0.1p to 94.7p, meaning the stock has risen by more than 40% in the last year.
In other corporate news, shares in Carphone Warehouse jumped 5% - up 8.5p to 184p - after it reported a better-than-expected 57% leap in half-year profits to £8.3 million and said it was "quietly optimistic" for the festive season as smartphone deals breathe new life into the pay-as-you-go market.
WH Smith climbed 1% or 7p higher to 617p after it bucked another fall in sales today by insisting it is "well positioned" for continued profitable growth.
The biggest FTSE 100 risers were Centrica up 7.5p at 318.3p, Amec ahead 23p at 1056p, Bunzl up 13p at 1043p and SSE ahead 17p at 1400p.
The biggest FTSE 100 fallers were Evraz down 16.4p at 217.4p, Randgold Resources off 355p at 6575p, Eurasian Natural Resources down 13.4p at 276.2p and Burberry off 51p at 1180p.
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