Britain's FTSE 100 index fell 1.5 percent in early trade on Wednesday, hurt by weakness in commodity stocks, banks and companies going ex-dividend, including heavyweight Vodafone.
By 0752 GMT, the FTSE 100 was down 67.39 points at 4,409.63, after slipping 0.7 percent on Tuesday. Oil producers were among the standout losers, with BP, BG Group, Royal Dutch Shell, Tullow Oil and Cairn Energy down 0.8-2.6 percent.
Barclays lost 4.9 percent, extending Tuesday's 13.5 percent slide after Abu Dhabi government-owned International Petroleum Investment Company sold a more than 11 percent stake in the British bank.
Within the sector, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered slipped 1.1 percent to 2.7 percent.
"The big question all around is capital raising. They have done that in America. Subsequently, does that mean we will need more capital (for British banks)?," said Manus Cranny at MF Global Spreads.
Index heavyweight Vodafone fell 4.7 percent after going ex-dividend.
Cable & Wireless, International Power, National Grid, Rexam and WPP also fell after trading ex-dividend.
Miners were also weaker, with BHP Billiton, Lonmin, Xstrata , Antofagasta and Kazakhmys losing between 1.4 and 2.9 percent.
Rio Tinto eased 1.2 percent. The Australian Financial Review said the miner may cut the size of its planned $7.2 billion issue of convertible bonds to China's Chinalco and raise more equity via rights issue instead.
"The debate is still raging whether we are seeing the early stage of a new bull market or this is simply a bear market rally, with the FTSE 100 still flat for the year," said Richard Hunter, head of UK equities at Hargreaves Lansdown.
British investors were their most upbeat in May since the end of last year as people became more confident about the prospects for the economy, the Nationwide Building Society's consumer confidence index showed.
In a further sign that the economy may have seen the worst of the recession, the pace of decline in Britain's job market eased again in May, the KPMG/Recruitment and Employment Report on jobs showed.
Investors will watch British PMI data for May at 0828 GMT for more clues on the outlook for the domestic economy, while U.S. ADP employment and factory orders data will also be in focus later in the session.
SUPPORTING CASTS
Cigarette makers, with British American Tobacco up 0.4 percent and Imperial Tobacco rising 1.1 percent, offered some support to the index after Citigroup issued a bullish note on them.
Power station operator Drax advanced 1.7 percent, boosted by an upgrade to "equal-weight" from Morgan Stanley.
Food retailers were also in demand, after Cazenove upgraded the sector to "neutral" from "underweight". Tesco, Morrison Supermarkets and Sainsbury put on between 0.5 and 1 percent.
Lloyd's of London insurer Amlin shed 6.1 percent to top the list of losers. The company said it had agreed to buy Fortis Corp Insurance, a provider of corporate property and casualty insurance, from the Dutch government for 350 million euros ($497.5 million).
