London's FTSE 100 Index fell into the red today as the rally in the banking sector fizzled out and investors looked to secure profits from recent gains.
The Footsie closed 46 points lower at 5319.7, with worries over slowing recovery in the US and UK adding to profit-taking pressures.
Wall Street's Dow Jones Industrial Average also slipped in early trading after an unexpected decline in manufacturing orders during June reinforced concerns the US recovery is running out of steam.
On currency markets, there was no let up in the pound's rally against the dollar as it rose past 1.56 dollars - its highest level since mid-February.
But banks stocks gave back some of yesterday's impressive gains, having driven the Footsie higher on Tuesday amid prospects of more lenient regulatory reforms. Lloyds Banking Group eased 2.5p to 69.4p and Royal Bank of Scotland dropped 0.6p to 49.7p.
The market was also knocked by cautious comments on the UK economy from Bank of England Governor Mervyn King.
He said he was not confident of a "sustained" recovery and also warned of an uncertain world outlook, although mining shares were higher on optimism over Asia's two leading economies, Japan and China.
The latter's central bank said it believed its economy was unlikely to suffer a "double dip" while the International Monetary Fund also said growth should be robust. Xstrata was one of the top tier's best performers - cheering 13p to 1044.5p.
Shares in British Gas owner Centrica were down 1%, or 3.7p to 304p, after it posted half-year results in line with market expectations.
Centrica lifted overall operating profits 65% to £1.56bn (€1.87bn) but the focus of households was on the 98% rise in British Gas profits to £585m (€702m) after the company benefited from the coldest winter in 30 years.
Engineering firm Invensys provided one of the biggest falls - off 13.9p to 279.1p - even though it said it expected to deliver an improved performance in the year. The stock has made strong gains in recent weeks on takeover speculation but lost 5%.
In the FTSE 250 Index, shares in directories firm Yell continued to struggle after the company warned revenues would suffer due to uncertainty over the pace of economic recovery. While its fall in first-quarter revenues and earnings met City expectations, shares fell 19% or 5.7p to 24.5p.
EasyJet shares were also lower - down 7% or 30.9p to 403.6p - as founder Sir Stelios Haji-Ioannou stepped up his attack on the budget airline by threatening to withdraw the rights to the "easy" brand in a row over punctuality.
The airline had earlier delivered a blow, saying temporary action to resolve "crewing issues" in some parts of its network would lift costs by up to 3% during the current financial year.
The biggest Footsie risers were BSkyB up 9.5p to 720p, Xstrata ahead 13p at 1044.5p, BHP Billiton up 23p at 1991.5p and Rio Tinto up 32p at 3387.5p.
The biggest Footsie fallers were Scottish & Southern Energy down 63p to 1115p, Invensys off 13.9p to 279.1p, Associated British Foods down 47p to 1044p and Intertek down 65p to 1604p.