Uncertainty over the progress of Ireland's debt rescue and China's efforts to control inflation combined to unsettle world markets today.
The FTSE 100 Index rallied 76 points on Thursday but finished 35.9 points lower at 5732.8 today as investors worried about the state of the Irish talks, which are key to stabilising Europe's financial system.
In particular, the potential for deadlock over the future of Ireland's low rate of corporation tax has been blamed for the end of recent market relief over an aid package likely to run into tens of billions of euros.
US markets were also on the back foot after China's monetary authorities ordered banks to hold back more money as reserves in a new move to curb lending and cool inflation.
The action came as Beijing tried to restore normal financial conditions and curb inflation, which rose to a 25-month high of 4.4% last month.
The potential restraint on growth put pressure on mining stocks as Kazakhmys dropped 20p to 1450p and Eurasian Natural Resources dipped 17p to 910p.
Currency markets were mixed, with the euro recovering from recent weakness to gain against the pound, which in turn was down against the dollar at 1.59.
Rolls-Royce shares remained under pressure after Airbus said it would seek "full financial compensation" from the engine maker following the disruption caused by the blow-out of a Qantas A380 engine.
The stock, which peaked for the year at 661p on November 1 before dropping as low as 563p, was off 11.5p at 592p today, a fall of nearly 2%.
The Irish uncertainty contributed to a poor session for London's banking stocks, with Lloyds Banking Group down 1.1p at 66.7p and Royal Bank of Scotland off 0.2p at 41.8p.
HSBC dropped 9p to 657.5p, while Standard Chartered was another faller, down 49p to 1803p, as investors worried about the impact of China's monetary strategy on the Asian-facing bank.
One of the biggest top flight falls of the session came from Capita Group after Thursday's admission that pressure on public spending will dent sales more than it had previously expected. The outsourcing firm lost another 2% or 13p to 677p after dropping 4% yesterday.
In a quiet session for corporate results, pubs and brewing firm Fuller Smith & Turner advanced 2% or 13.5p to 626p after it reported an 11% hike in half-year profits and said it was hopeful that its focus on the south of England will help shield it from much of the impact of Government spending cuts.
The solid update helped fuel a gain of 7% for Enterprise Inns, which encouraged investors with signs of a trading turnaround earlier this week. Enterprise shares were up 6.8p at 106.6p.
The biggest FTSE 100 risers were ARM Holdings up 14.3p at 384.9p, Man Group ahead 10.9p at 295.1p, Essar Energy up 12p at 518.5p, International Power ahead 8.5p at 436.8p.
The biggest fallers were Sage Group down 8.2p at 261p, Standard Chartered off 49p at 1803p, Marks & Spencer down 9.6p at 380.6p and SABMiller off 42.5p at 2114.5p.