Britain's top share index fell 1.9 percent early on Tuesday, tracking losses in the U.S. and Asia, as economic worries returned to the fore to hurt global markets, knocking oils, miners and banks.
By 0920 GMT, the FTSE 100 index was 83.53 points lower at 4,320.39 after gaining 38.96 points, or 0.8 percent, on Monday.
Heavyweight oil companies were a drag on the blue-chip index as crude prices fell back towards $60 a barrel.
BG Group lost 5 percent, BP 1.2 percent, and Royal Dutch Shell was off 2.1 percent.
Miners also fell sharply on lower metals prices with Lonmin down 6.3 percent and Kazakhmys falling 5.3 percent.
Some banks were also among the biggest blue-chip losers, with Standard Chartered down 4.6 percent as investors worried that the Asian-oriented bank might need to raise capital.
Traders said Monday's 7.2 billion euro rights issue move by Spain's Santander may increase the pressure on Standard Chartered, which has so far proved fairly resilient to the banking sector's woes.
Lloyds TSB also stood out, down 4.0 percent, as the HBOS takeover saga dragged on, with uncertainties about whether any counter proposals could be made to the agreed deal. HBOS shares shed 2.4 percent.
"Negativity from yesterday is continuing to feed through after the late U.S. sell-off on earnings concerns and with Circuit City filing for bankruptcy protection." said Ben Timms of Blue Index.
"This filtered through to Asia and on to the UK this morning, with some disappointing corporate news from the likes of Intercontinental Hotels and Cookson lightly offset by a relief rally from Vodafone," Timms added. Vodafone shares gained 6.8 percent to top the FTSE 100 leader board after reporting first-half results slightly ahead of expectations.
The mobile phones group cut its full-year revenue outlook and will reduce costs by 1 billion pounds, but increased its forecast for free cash flow.
Timms, however, highlighted a closing of short positions in Vodafone rather than any buying expectations.
Intercontinental Hotels dropped 5.4 percent after the world's largest hotelier beat forecasts with a 14 percent rise in third-quarter profit but warned it saw a sharp deterioration in market conditions in October.
Cookson Group was the top FTSE 250 faller, down 12.8 percent after the industrial materials group said its 2008 performance would fall short of management expectations.
UK ECONOMIC GLOOM CONTINUES
British retail sales fell for a fifth straight month in October on a like-for-like basis and by the biggest amount in more than three years the latest survey from the British Retail Consortium showed.
Retail stocks fell following the news giving back some of last week's UK rate-hike inspired gains, with Marks & Spencer losing 0.9 percent while Next shares shed 0.6 percent.
British house prices fell slightly less sharply in the three months to October than in the three months to September, but home sales hit the lowest in at least 30 years a survey from the Royal Institution of Chartered Surveyors showed.
Housebuilders were mixed, with Bellway up 0.7 percent and Redrow ahead 0.9 percent, while Persimmon lost 1.9 percent and Taylor Wimpey shed 5.7 percent, with the latter knocked by a dull trading update.
