Investors shied away from risk today as the enormity of the task faced by new governments in Italy and Greece sank in.
The FTSE 100 Index closed 26.3 points lower at 5,511.9 after investors demanded an interest rate of 6.29% at an auction for five-year Italian bonds, the highest level since 1997.
Elsewhere, new Greek leader Lucas Papademos must persuade his country’s creditors to hand over the next £6.8billion instalment of the bailout to stave off a debt default.
The banking sector came under pressure amid fears over its exposure to sovereign debt, with Barclays losing 4.9p at 174.1p, Royal Bank of Scotland dropping 0.5p at 21.9p and Lloyds Banking Group off 0.5p at 28.4p.
The mining sector was also hit, with Vedanta Resources falling 2% or 42p to £11.20 and Kazakhmys losing 20p at 911.5p.
Broadcaster ITV topped the FTSE 100 Index after its advertising revenues improved by 1% in the three months to September 30, defying expectations for a fall. Shares rallied 3% or 2.1p to 66.8p.
Meanwhile, Majestic Wine shares were 4% lower after a 20% jump in half-year profits was overshadowed by a less sparkling sales performance in the period since the end of September. Shares fell 16p to 400p.
The UK’s biggest fresh milk supplier Robert Wiseman fell 0.5p to 280.5p after it revealed a 42% slump in pre-tax profits in the six months to October.
The biggest Footsie risers included Burberry ahead 44p at £14.21, Smith & Nephew up 14.5p at 572.5p and Vodafone ahead 2.7p at 182.7p.
The biggest Footsie fallers were Vedanta Resources down 42p at £11.20, Standard Chartered off 45.5p at 1,356.5p, Pearson down 32p at £11.05 and Weir Group off 55p at £19.05.
Alan MacPhee, of investment manager and financial planning specialist Brewin Dolphin in Aberdeen, noted that Parkmead added 5.15% to close at 12.375p and Xcite Energy added 1.23% to finish at 124p.
Fallers included EnQuest, which slipped 2.1% to 102.65p, with Petrofac dropping 2.03% to £14.01. FirstGroup also fell, closing down 1.71% to 339.75p.