London's Footsie slumped to a three-month closing low yesterday after being dogged by fresh fears that Greece would default on its debts.
European Union finance ministers said they will not give Greece the latest €12 billion (10.6bn) instalment of its emergency loan until it agrees to even tougher austerity measures, raising uncertainty over its economic stability.
The FTSE 100 index was down 21.55 points to close at 5,693.39, having recovered from a fall of 67 points earlier in the session.
Howard Wheeldon, strategist at BGC Partners, said: "There is clearly a shortage of good news about and the factors we see in front of us indicates that we are going to be in negative territory on and off for some considerable time."
The market was reassured after EU leaders at a meeting in Luxembourg said they were confident Greece will avoid a default. The Footsie was also boosted by a strong opening from the Dow Jones Industrial Average, which lifted 0.6 per cent in early trading.
The pound was up against the dollar at $1.62, but was down against the euro, at €1.13, after the single currency rebounded on increasing optimism about the situation in Greece. Banking stocks were among the biggest losers from the eurozone debt worries. Royal Bank of Scotland led the fallers' board, after employees cashed out a swathe of stock awarded for bonuses. Shares were down 4 per cent, or 1.8p at 38.5p.
Lloyds Banking Group dropped 1.2p to 47.2p after concerns over its exposure to the Greek crisis combined with fears that a strategy review at the end of the month would see new boss Antonio Horta-Osorio provide a gloomy update. Barclays eased 4.7p to 252.6p.
However, mining stocks clawed back some of their earlier losses on the back of the more hopeful news about the eurozone debt crisis. Copper miner Kazakhmys, which had been down 33p at noon, closed down 14p at 1,247p.
Aggreko, the Glasgow-based company supplying power for next year's London's Olympics, was among the biggest fallers despite revealing underlying revenues have risen by 9 per cent so far this year, while underlying profits were 17 per cent higher.
The stock has been under pressure recently after Hugh Osmond, the financier who floated Pizza Express, bought US rival APR Energy, raising the threat of more competition.
Shares fell 37p to 1,874p after the firm warned that any bottom line growth would be soaked up by exchange rate fluctuations with the weak dollar.
Meanwhile, a strategy update from Superdry fashion owner SuperGroup failed to win over investors as shares slumped 4 per cent, or 37p to 863p. The retailer, which reported an improvement in trading over the past three weeks, said plans to more than double internet sales and open 20 stores in the UK over the next year were on track. Its shares have now nearly halved in value in recent months.Johnston Press, the publisher of The Scotsman and Scotland on Sunday, closed up 5.3 per cent or 0.27p at 5.37p after revealing that it would contract out the management of its facilities. The company had hit 5.61p earlier in the session, a rise of 10 per cent.