The FTSE 100 Index fell for the second day this week as traders sat on their hands ahead of the Scottish referendum and this week's meeting of US policymakers.

The top flight was 12 points lower at 6792.2, while European markets were down by a similar level as attention turned to the Federal Reserve and the likely date of its first hike in interest rates.

With the Fed's Wednesday meeting in mind, the pound briefly dipped below 1.62 against the dollar, particularly as a further drop in inflation to 1.5 per cent kept the need for an interest rate hike in the UK on the back burner. Sterling was down slightly against the euro, at 1.25.

On the 22nd anniversary of Black Wednesday, when the pound collapsed, currency markets have been dominated by the Scottish referendum.

IG market analyst David Madden said: "The Scots go to the polls on Thursday, and we could have a 'Black Friday' on our hands depending on which way the vote goes. Our binary bet is now pricing in a 22% chance of Scotland voting 'Yes'."

Among London stocks, Sports Direct International was the biggest faller in the top flight - off 26p to 664p but publisher Pearson was a strong riser, up 20p to 1226p, after a ratings upgrade from Morgan Stanley.

Sentiment outside the top flight was also weak after a series of disappointing trading updates, including from online fashion chain ASOS. It said it did not expect a rebound in profitability in the year to August due to investment costs. Shares in the former stock market darling slumped by almost another 9 per cent or 215p to 2207p.

Thomas Cook shares were 6 per cent lower after it reported a moderation in bookings in Germany as consumer confidence weakens in the face of the eurozone's subdued outlook and geopolitical events. Shore Capital said Thomas Cook's latest update was disappointing but retained its buy rating as the wider turnaround strategy remains on track.Thomas Cook shares fell 8p to 122p.

Housebuilder Crest Nicholson was also lower after it reported a slight moderation of sales rates in the last few months, albeit still significantly above historic norms. Forward sales at the start of the month were £348m, up 11 per cent on a year earlier, but shares fell 10.9p to 326p.

And catalogue retailer N Brown, which trades as JD Williams, Simply Be and Jacamo, fell 19.6p to 385.4p after it reported a 0.6 per cent drop in half-year revenues following a rephasing of its mailing programme.

The biggest risers on the FTSE 100 Index were Babcock International up 20p at 1060p, Pearson up 20p at 1226p, Royal Bank of Scotland up 4.6p at 351.3p and BP up 4.1p at 472.4p.

The biggest fallers were Sports Direct International down 26p at 664p, St James's Place down 16.5p at 678p, SABMiller down 79p at 3661p and CRH down 30p at 1419p.