A gloomy forecast from the Bank of England compounded fears over the future of the eurozone and further knocked the confidence of investors today.
The FTSE 100 Index pared some of its losses after the US Federal Reserve said industrial production grew at its fastest rate in three months but still closed 8 points lower at 5,509.
Shares in FTSE retailers were shaken by the first profits warning from the sector in the run up to Christmas.
Despite strong demand for record-breaking title Call of Duty: Modern Warfare 3, Game Group said it expected like-for-like sales for this year to suffer a 7% fall at best. The warning sent Game shares down by 46% or 8.8p to 10.3p.
Argos owner Home Retail Group fell 5% or 5.9p to 72.8p, Dixons Retail eased 0.2p to 11.1p and Marks & Spencer dropped 7.8p to 325p.
Elsewhere, Vodafone was 4% lower as new investors lost the right to the company’s most recent dividend payment, leaving its shares down 6.7p at 173.9p.
On a brighter note, Speedy Hire rose 7% or 1.3p to 20.3p after it reported a return to half-year underlying profits, helped by demand from customers in the utility and petrochemical sectors.
Barratt Developments was up 6.4p at 96.1p or 7% after a trading update showed it had been performing in line with market expectations.
The biggest Footsie risers included Intertek up 66p at £19.52, Kingfisher ahead 6.1p at 254.3p and Meggitt ahead 9p at 391.9p.
The biggest Footsie fallers were Essar Energy down 14.6p at 258.9p, British Sky Broadcasting off 36.5p at 716p and Icap down 17.1p at 349.9p.
Alan MacPhee, of investment manager and financial planning specialist Brewin Dolphin in Aberdeen, noted that Parkmead continued their rally of recent days adding a further 6.78% to close at 15.75p, with Edinburgh-based Cairn Energy adding 2.43% to 295p. Amongst the fallers, Aberdeen Asset Management slipped 1.09% to 190.7p with FirstGroup shedding 0.88% to 336.8p.