Britain's top share index fell 0.1 percent early on Thursday ahead of an expected rate cut from the Bank of England, as deepening gloom on the economic outlook hit broader sentiment and dented metal prices, knocking miners.
Investors are keenly awaiting the decision from the BoE's Monetary Policy Committee which is widely expected to cut rates by 50 basis points to 1.5 percent at 1200 GMT, an all-time low, as the central bank battles to boost an ailing domestic economy.
By 0902 GMT, the FTSE 100 was down 2.23 points at 4,505.28 having fallen 2.8 percent on Wednesday.
The blue chip index ended a six-day, 10 percent rally on Wednesday as U.S. data showed a sharp increase in unemployment prompting sharp falls in world equity markets.
A fresh wave of profit warnings globally including from microchip maker Intel Corp also dampened sentiment.
"Yesterday you had some bad corporate updates, Intel particularly, also the ADP employment," said John Prior, director at Killik & Co.
"The markets have had a good run, the bad news is likely to continue over the short term, obviously notwithstanding what comes out of the rate cut."
Mining stocks were the biggest weight on the index, dragged down by weaker metals prices.
Rio Tinto, BHP Billiton and Xstrata fell between 1.9 percent and 4 percent.
Energy stocks, however, were robust, as crude recovered slightly from a 12 percent dive overnight to hold at around $43 per barrel.
Oil giants BP and Royal Dutch Shell both added 0.9 percent and Tullow Oil gained 7.5 percent after it said its Mahogany-3 well had made a new discovery beneath its Jubilee field.
The UK equity market rallied after Christmas even as data highlighted the gloomy outlook for the economy, and big name retailers have proved resilient as sales over the festive period were not as weak as feared.
But the grim sentiment underlying on the high street saw supermarket group J Sainsbury fall 1 percent despite announcing increased like-for-like sales for the third quarter and continued growth in customer numbers.
FTSE 250-listed recruiters Michael Page International and Hays slid 1 percent and 5.9 percent respectively after both companies announced poor results, pointing to the underlying weakness in the UK labour market.
Banks were mixed; Barclays and HSBC lost 1.5 percent and 1 percent but Standard Chartered gained 0.8 percent and Lloyds TSB was up 3.7 percent.
Royal Bank of Scotland gained 2.9 percent after a report in the Financial Times said it is mulling a sale of its 4.3 percent stake in Bank of China as part of a widespread review of its international assets.
Property company Land Securities fell 0.9 percent after it said it will sell its Trillium outsourcing arm for 750 million pounds ($1.1 billion) in a deal which streamlines its business and bolsters its balance sheet amid the miseries in the property market.
