London's leading shares retreated today as nerves over record oil prices overshadowed trading.
The FTSE 100 Index, which slipped 1% on Monday after nearing seven-year highs last week, fell again today to close 30.2 points lower at 6614.3.
The decline came despite the Government's preferred measure of inflation remaining at 1.8% in September, better than the 1.9% predicted by most analysts.
While the update will boost hopes of a rate cut from the Bank of England, the City remains wary about inflationary pressures after oil prices rose to nearly $88 a barrel in New York.
Downbeat comments from US Federal Reserve chairman Ben Bernanke on the slumping housing market being a "significant drag" on the economy also led to early losses on Wall Street.
Catalysts and precious metals firm Johnson Matthey led the Footsie fallers board after a downgrade from Evolution Securities. The stock was 87p lower at 1753p, a drop of nearly 5%.
Negative comments on the mining sector from Merrill Lynch also saw Antofagasta slip 24p to 829p, while Anglo American was off 86p to 3320p.
Meanwhile fellow heavyweight Vodafone suffered with its shares down by nearly 2% or 2.7p at 173.6p. The mobile phone giant fell after telecoms equipment firm Ericsson cut its third quarter earnings forecast, hitting its shares in Stockholm.
Northern Rock shares remained volatile as investors digested reports that bidders for the beleaguered mortgage bank may be prepared to leave shareholders with nothing.
Shares earlier dipped more than 5%, but the lender recovered to lead the Footsie risers board, gaining 7.25p to 223.5p.
Alliance & Leicester followed behind, advancing 21p to 775p, but the rest of the sector was already under pressure after updates from Citigroup and Nomura on Monday. Barclays fell 11.5p to 615p and Royal Bank of Scotland by 12p to 514.5p.
The rising oil prices benefited energy companies, with BP ahead 4.5p at 627p and Royal Dutch Shell up 26p at 2081p. Vague takeover speculation also fuelled BG Group, which rose 19p to 914p, while British Energy was up 6p at 570.5p.
BAE Systems was an early faller after it said chief executive Mike Turner will leave the company in August 2008. The surprise move caused the shares to slip, but they later recovered losses to stand unchanged at 510p.
Whitbread shares failed to benefit from strong half-year results, with the stock 1% lower, or 17p, at 1708p after no updates on a shareholder payout following its sale of the David Lloyd leisure chain. The Premier Inn owner had earlier posted a 13% hike in half-year profits thanks to strong performances at its budget hotel group and coffee chain Costa Coffee.
One of the brightest performances of the session came from the FTSE 250 Index after Durex and Scholl firm SSL International delivered a better-than-expected sales update. The stock rose almost 4%, or 19p to 518p.
The biggest Footsie risers were Northern Rock up 7.25p at 223.5p, Alliance & Leicester ahead 21p at 775p, BG Group up 19p at 914p, and Wolseley ahead 16p at 815p.
The biggest fallers were Johnson Matthey down 87p at 1753p, Next off 69p at 2016p, Antofagasta down 24p at 829p and Tate & Lyle off 11.75p at 422.75p.