Traders remained on edge today as blue-chip shares failed to recover from big losses in Thursday's session sparked by fears over an early end to US monetary stimulus.
Growing anxiety that quantitative easing (QE) on the other side of the Atlantic will begin to be tapered off from next month amid signs of economic recovery are haunting markets both in London and on Wall Street.
The FTSE 100 Index edged down 5.3 points to 6478 as it failed to recover any of its 100-point slump yesterday. Bourses in Germany and France were also subdued after losing ground in the previous session.
In New York, the Dow Jones Industrial Average closed 1.5% down last night.
Fears of an end to stimulus mean that encouraging economic data is being interpreted negatively by the markets, with good news sparking fears that the US Federal Reserve will accelerate the timetable for withdrawing QE.
Fixed income interest rates have risen to their highest levels since 2011, fuelling investor fears that this could act as a brake on the recent improvement in economic activity.
Matt Basi, head of UK sales trading at CMC Markets UK, said: "After yesterday's sell-off in the wake of better than expected jobless claims data, we appear to be back in good news is bad news territory."
In London, some of the stocks which have suffered falls in recent days were consolidating in a calmer session for the market so far.
They included builders, whose shares have been hit by fears that details of the Bank of England's "forward guidance" policy unveiled last week on maintaining low interest rates may instead see them rise earlier than expected.
Persimmon, which is due to report results next week, pulled back from a recent share price decline with a rise of 40p to 1137p, while in the FTSE 250 Index, Barratt Developments was up 6.8p to 308p.
Bovis Homes climbed 33.8p 757.2p while Berkeley Group lifted 72.5p to 2158.5p.
William Hill was one of the biggest fallers in the top flight after the Treasury unveiled new proposals to ensure remote gambling operators with UK customers will pay gambling taxes from next year. Shares were down 6.2p to 420.4p.
Royal Bank of Scotland was also a big faller in the FTSE 100 after Investec cut the cut stock to sell, even though it admitted the bank was still on course for a sustainable recovery.
The basis of the downgrade, which left shares down 4.4p to 336.2p, reflected the broker's frustration at the pace of the turnaround.