Banks and financial stocks pressured Britain's top share index yesterday as concerns over Royal Bank of Scotland's exposure to Ireland's debt troubles weighed on its shares, and ICAP fell after a broker downgrade.
Weakness among financials offset gains in commodity-linked assets, which rallied after strong data from China, the world's biggest consumer of raw materials.
By the close, the benchmark FTSE 100 index was down just 1.71 points at 5,815.23, after it closed 1 per cent off on Wednesday.
Angus Campbell, head of sales at Capital Spreads, said: "The rally we have enjoyed over the past few months looks to be stalling as the situation in Europe is getting more and more unsettling for investors."
In New York, the Dow Jones Industrial Average dropped more than 100 points in early trading after communications giant Cisco gave a bleak outlook over its prospects in the age of austerity, sending its shares sharply lower.
There was also anxiety as investors waited for news on the G20, where world leaders sought to resolve tensions over currencies and trade deficits.
In London, Royal Bank of Scotland led the banking sector's retreat amid fears over its exposure to the financial crisis in Ireland.
Irish officials warned that a surge in the country's borrowing costs to record highs had become "very serious" and the EU said it was ready to act.
RBS, which owns Ulster Bank, saw its shares slump 5 per cent at one stage as Ireland's cost of borrowing hit its highest level since the launch of the European single currency. Shares closed down 1.1p or 2.7 per cent to 41p.
Other banks followed suit with Barclays down 4.7p to 284.9p, HSBC off 5.6p at 684p and Standard Chartered declining 3p at 1,885.5p. Lloyds bucked the trend, gaining 1p to 68.59p.
Interdealer broker ICAP fell 4.1 per cent to 473.6p after Credit Suisse cut its rating to "neutral" on valuation grounds.
Among stocks, British Airways sank towards the bottom of the Footsie after a planned ballot of cabin crew on resolving their dispute with the airline was suspended, dashing hopes of an end to the bitter row.
Unite had been due to ask its 11,000 members whether they wanted to accept a suggested deal, but leaders of the union's cabin crew branch decided they could not support recommending the offer. Shares were down 3 per cent or 8.6p at 264.2p.
BT headed the risers' board after the telecoms giant impressed analysts with solid half-year figures.
A strong performance in broadband meant underlying profits for the second quarter were up 13 per cent at 496 million, beating City expectations and prompting BT to raise its forecast for full-year underlying earnings to 5.8 billion. BT shares were 6 per cent higher, up 9.7p to 169.1p.
Outside the top flight, shares in JJB Sports plummeted after analysts widened their forecasts for full-year losses to about 40m.This followed an update showing that promotional efforts and its Serious about Sport turnaround strategy had failed to sustain a sales revival. JJB shares dropped 1.6p to 8p.