Fears to west and east send FTSE south

Investors were also concerned over future growth in China after the country increased its banks' reserve requirements.

After its 76-point gain on Thursday, the FTSE 100 retreated 35.88 points, or 0.6 per cent, to 5,732.83. It left Britain's benchmark share index trailing 1.1 per cent down on where it started the week, having fallen 1.3 per cent the week before.

David Jones, chief market strategist at IG Index, said: "After Thursday's relief rally on signs that the Irish rescue package was moving forward, it seems like the markets are concerned that this could mean the start of sovereign debt crisis, part two. Once again there has been a risk-averse tone to trading - but to give the decline some perspective, the FTSE has not given back all of Thursday's gains and once again there have been some buyers late in the day."

US markets were also on the back foot in early trading yesterday 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 per cent last month.

The potential restraint on growth put pressure on mining stocks as Kazakhmys dropped 20p to 1,450p 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 1 November before dropping as low as 563p, was off 11.5p at 592p, a fall of nearly 2 per cent.

The Irish uncertainty contributed to a poor session for 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 1,803p, 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 a further 2 per cent or 13p to 677p after dropping 4 per cent in the previous session.

In a quiet end to the week for corporate results, pubs and brewing firm Fuller Smith & Turner advanced 2 per cent or 13.5p to 626p after it reported an 11 per cent hike in half-year profits and said it was hopeful that its focus on the south of England would shield it from government spending cuts.

The solid update helped fuel a gain of 7 per cent for Enterprise Inns, which encouraged investors with signs of a trading turnaround earlier this week. The shares were up 6.8p at 106.6p.