The FTSE 100 fell 35.56 points to 6,367.89, compounding a drop of more than 120 points in the previous session as it tested new seven-month lows.
Packaging group Mondi was the heaviest blue-chip faller, down 46p or 3 per cent at 1,488p, while insurer Prudential fell 42.5p to close at 1,472p.
Sentiment was hit in the session after minutes of the US Federal Reserve’s July meeting gave little direction on speculation that officials are ready to raise interest rates next month for the first time in a decade.
Joshua Mahony, market analyst at IG, said: “The widespread selling amid seemingly bullish indicators, such as a relatively dovish Federal open market committee and Greek bailout completion, shows the cynicism and anxiety surrounding markets right now.”
He added: “To some extent the repercussions of the Greek affair have driven chartists to hold a significantly more pessimistic view than was the case not so long ago. It feels like we’ll need something fairly significant to bring the bulls back into dominance as any upside now comes amid expectation of yet another sell-off.”
Markets have fallen heavily in recent weeks as investors have been spooked by China’s slowing economy and the depreciation of the yuan, as well as plunging commodity prices.
But the Footsie’s heavy fall came despite a bounce-back among miners, with Randgold Resources up 233p or almost 6 per cent at 4,255p, while Fresnillo added 36.5p to close at 684.5p and Anglo American gained 31.1p to 740.5p.
Elsewhere, retailer WH Smith dipped 21p to 1,549p despite saying its annual results would be “slightly ahead” of City hopes.