Britain's top share index was 1.1 percent lower early on Thursday after mixed showings in Asia and on Wall Street overnight, with weakness in miners and financials countering gains by heavyweight oil stocks.
At 0855 GMT, the FTSE 100 index was 49.71 points lower at 4,317.57. The UK blue-chip index closed 0.3 percent lower on Wednesday, snapping two sessions of good gains. "'Tis the season to be realistic," said Felix Riley, head of binary betting firm ChoiceOdds. "Domestically, the demise of Woolworths compounds the gloom, and the slump of the pound against the euro is a damning verdict by the markets on the UK economy."
Britain's ailing economy will start to recover towards the end of 2009, but it is hard to judge how fast that improvement will be, Bank of England policymaker Kate Barker said in a regional newspaper interview on Thursday.
Weak miners were the main drag on sentiment as metals prices retreated on concerns over Chinese growth, with copper down 1.5 percent.
Rio Tinto, Wednesday's big gainer on cost-cutting moves, shed 3.4 percent, with BHP Billiton, Anglo American, Kazakhmys and Antofagasta down 2.8-4.3 percent.
Mexican silver miner Fresnillo, however, added 3.8 percent after confirmation after the close on Wednesday that it would be one of five FTSE 100 stocks to be demoted after the latest quarterly index review.
Insurers were also under pressure after U.S. insurer AIG, which is looking to sell assets around the globe to repay a $152 billion U.S. government rescue package, said difficult markets may force it to delay divestment plans.
Prudential, known to be one of the companies in talks to buy a Japanese unit of AIG in a deal that could fetch $10.8 billion, lost 4.9 percent.
Aviva was the top FTSE 100 faller, down 5 percent, while Friends Provident lost 4.3 percent and Standard Life shed 2.8 percent.
OILS REMAIN IN DEMAND
Strength in heavyweight energy issues, however, helped counter the decliners as crude prices held steady around the $43 a barrel level ahead of next week's OPEC meeting, where the producer group is expected to sanction production cuts.
Integrated oil major BP added 0.9 percent, while BG Group took on 0.8 percent.
Tullow Oil was the top FTSE 100 riser, up 7.5 percent after it revealed new oil finds in Ghana and Uganda.
Fellow explorer Cairn Energy added 2 percent.
Banks rallied after recent sell-offs, with Standard Chartered, which has been unsettled by a recent fund raising, gaining 3.2 percent, while Barclays firmed 1.8 percent, and HBOS added 1 percent.
With no major UK macro data due during the day, investors looked ahead to the latest U.S. weekly jobless claims numbers for a clue to the health of the world's biggest economy.
"Should the numbers come out worse then expected, we could see the equity markets around the world take a dip," said David Evans, market analyst at BetOnMarkets.com.
