Britain's top share index fell 0.4 percent early on Friday as worries about the financial system persisted and investors also proved reluctant to take positions ahead of key U.S. jobs data due later in the session.
By 0753 GMT the FTSE 100 was down 26.1 points at 4,884.5 in a volatile session after falling 1.8 percent on Thursday.
Financial stocks were pressured with sentiment still overcast by continued strains in the money markets, with interbank rates remaining high.
Interdealer broker ICAP fell 0.6 percent and Thomson Reuters fell 1.1 percent, while London Stock Exchange slid 4.7 percent after Credit Suisse cuts its rating for the UK bourse operator to "neutral" from "outperform".
HSBC fell 1.5 percent while Royal Bank of Scotland dipped 0.2 percent, but HBOS and Lloyds TSB gained 3.6 and 2.5 percent respectively as investors became more confident that a Lloyds takeover will go through. Barclays was also up 3.7 percent.
Life assurer Old Mutual gained 7 percent after it said its Swedish subsidiary Skandia AB has been ordered 47 million pounds to settle a dispute of Skandia's asset management arm.
The UK benchmark is down 4.2 percent this week and 25 percent this year. Equity investors were nervous as a darkening economic outlook and continuing uncertainty about the fate of a $700 billion bailout for the U.S. financial industry has kept the UK blue-chip index close to its lowest level in over three years.
Trading volumes were also seen restrained ahead of the closely watched U.S. non-farm payrolls data due at 1230 GMT.
"There are plenty of reasons for people not to have bets on the table ahead of the weekend," said Jeremy Batstone-Carr, head of private client research at Charles Stanley.
"The markets are going to be treacherous, we are close to two big hurdles, the last of which (the vote on the bailout) is after markets in Europe close… so it will take a tenacious investor to make an investment on a day like today."
Mining stocks fell with gold hit by a rising dollar and platinum near its weakest in almost three years on demand fears, while base metals like zinc and copper were also lower.
Rio Tinto fell 2.5 percent, Lonmin fell 3.5 percent while Kazakhmys lost 4.1 percent.
Energy stocks fell as oil fell below $94 per barrel. BP fell 0.3 percent, Royal Dutch Shell slid 1 percent while Tullow Oil lost 0.9 percent and Cairn Energy lost 2.2 percent.
Shares in Imperial Tobacco fell 1.1 percent after Citigroup cut its rating to "hold" from "buy".
