Britain's leading share index fell 0.8 percent early on Tuesday, as worries on the demand outlook dogged commodity stocks, while weak results from American Express sharpened fears in the banking sector.
By 0902 GMT the FTSE 100 index had fallen 30.64 points to 3,833.35 after closing 2.9 percent higher on Monday for its sixth gain in seven sessions.
Commodity stocks were the main drag on the index as base metal prices retreated from sharp gains in recent sessions while crude fell below $47 per barrel.
Jitters on the demand outlook resurfaced ahead of U.S. housing starts data due at 1230 GMT and expected to show a 16.8 percent drop to a record low.
"Today we have got the key data for the commodity stocks, U.S. housing starts, which should be a very weak number," said Jim Wood Smith, strategist at Williams De Broe. "So I think people are just selling in front of that housing number."
BHP Billiton, Anglo American, Xstrata amd Antofagasta fell 1.6-3.3 percent. Antrofagasta was also downgraded by Credit Suisse.
Rio Tinto lost 4.4 percent with uncertainty about a proposed $19.5 billion tie-up with Chinese state owned Chinalco also driving the performance of the stock. A source close to the Chinalco transaction said it only needed a simple majority of shareholder support to go ahead.
BP, Cairn Energy and BG Group lost between 0.4 and 1.4 percent.
Royal Dutch Shell fell 2 percent after The Times newspaper reported analysts warned it was to scrap its share buyback programme and more than double its debt this year as it struggles to maintain spending commitments.
Banks fell, mirroring weakness in U.S. counterparts after American Express said the number of people struggling to make credit card payments grew, casting doubt on banks' ability to return to profit in the downturn.
HSBC, Standard Chartered, Royal Bank of Scotland, Barclays and Lloyds Banking Group lost 0.2-3.4 percent.
British banks gained 14 percent last week, as investors became hopeful that stability was returning to the troubled sector.
"Financials have had a tremendous run over the past few sessions and then we did have that bad debt news from Amex, " said Wood-Smith "We are just getting a bit of feed through from that. An excuse for people to bank some profits from the dead cat bounce."
Britain wants banks to follow a code of practice aimed at making them more open about their tax liabilities, finance minister Alistair Darling said on Monday.
Investors were looking ahead to a two-day Federal Reserve meeting starting later in the day, and were also hopeful that the G20 meeting in London in early April may introduce measures to help speed the end of the recession.
