The FTSE 100 Index closed 13.3 points lower at 6104 as the Dow Jones Industrial Average also slipped into the red in early trading after the World Bank slashed growth forecasts.
It now expects the global economy to expand by just 2.4% this year, down from its June projection for global growth of 3% in 2013.
The World Bank also said that America's budget battles are restraining economic growth globally and the prospect of another stand-off over the country's debt ceiling pose a greater risk than even a renewed eurozone crisis.
In currency news, the pound fell after Tuesday's Fitch rating agency warning about the UK's credit rating and amid growing uncertainty over the possibility of a referendum on Britain's EU membership. Sterling fell to $1.60 and €1.20. UK blue chip banks were lower despite impressive figures from Wall Street giants JP Morgan Chase and Goldman Sachs.
Goldman reported net earnings nearly trebling to $7.3 billion (£4.6bn) in 2012, while JP Morgan posted a record $21.3bn (£13.2bn) in profits after a 53% surge in the final quarter.
But JP Morgan shares were knocked on the Dow Jones after publishing a damning report into its so-called "London Whale" trading loss.
On the FTSE 100, Lloyds Banking Group was off 1.4p to 53p and Royal Bank of Scotland was down 4p at 350.1p, while Barclays shed 2p to 293.4p.
Supermarket Tesco, which has said it is working with authorities to discover how traces of horse meat came to be in frozen beefburgers sold by the chain, fell 2.5p to 347.1p.
Thomson parent TUI Travel was the biggest riser in the top flight, up 11.1p to 292.5p after it confirmed talks over a reverse takeover by its German majority owner.
In retail trading updates, French Connection slumped 15% at one stage after it warned it expects full-year losses of up to £8m after a 2.9% drop in like-for-like sales for the 24 weeks to January 12. Shares were later 2.25p lower at 27.25p.
Meanwhile, a bigger-than-expected 8% surge in festive sales failed to benefit shares in pub chain JD Wetherspoon. It offset the trading progress by warning half-year margins were expected to be 1.1% lower than its previous financial year in the face of higher tax, utilities, labour, bar and food supply costs, and marketing expenses. Shares fell 13.5p to 518.5p.
Contextual targeting label: