Britain's top share index shed 0.9 percent by midday Monday as commodities and banks were weighed by fears that recent monetary tightening moves seen in China and India could stifle the fragile economic recovery.
By 1130 GMT, the FTSE 100 was down 47.98 points at 5,602.14, having closed at its highest level since June 25 2008 on Friday.
The UK blue-chip index has gained over 10 percent since the start of February, but retreated as an unexpected interest rate hike in India spurred fresh fears that withdrawals of economic stimulus could curtail global growth.
"The rate hike from India came as a bit of a shock," said Joshua Raymond, market strategist at City Index.
"When you align this decision with recent moves by China to cool excessive growth there too, the emerging markets picture is developing into one of concern that it could slow the wider economic recovery."
The India move led to a fall in metal and oil prices, which retreated on demand worries, and as the dollar — seen as a safe haven in uncertain times — strengthened.
Among the miners, Eurasian Natural Resources, Vedanta Resources, Kazakhmys and Xstrata fell 2 percent to 2.5 percent.
Meanwhile, oil majors BG Group, Royal Dutch Shell and BP shed 1.1 to 1.9 percent.
Banks were weaker as Greece and Dubai debt matters resurfaced. Barclays, Standard Chartered, Lloyds Banking Group and HSBC were 0.7 percent to 1.4 percent lower.
EU leaders seemed at odds over how or whether to offer assistance to Athens, setting the scene for a tense summit on March 25-26 and fuelling doubts over whether euro zone states will agree to any support package..
Meanwhile, state-owned conglomerate Dubai World is expected to propose a $26 billion debt restructuring plan to its creditors imminently, in a move seen as a test of the emirate's ability to honour commitments.
ICAP WOES
ICAP topped the blue chip fallers list, dropping 2.9 percent after the inter-dealer broker said it will scale back its cash equities business in Europe and Asia, with a pretax charge of 51 million pounds ($76.23 million).
Building materials supplier Wolseley fell 2.4 percent after saying it would remain cautious for the rest of the year and focus on controlling costs after seeing trading profit fall 34 percent in the first half.
Drug stocks looked unfazed by legislation overhauling the U.S. healthcare system, with an expected hit to earnings from 2011 offset by the long-term gain of extending sales to millions more Americans. Crucially, the U.S. government will not impose drug price caps.
AstraZeneca gained 1 percent, while GlaxoSmithKline rose 0.2 percent and Shire added 0.1 percent.
South African investment bank and asset manager Investec climbed 1.5 percent on its first day as FTSE 100 company after replacing insurance-focused takeover vehicle Resolution.
Technology firm Smiths Group topped the FTSE 100 risers chart, up 1.6 percent after the company bought Kansas City-based Interconnect Devices for $185 million in an all-cash deal.
Selected defensive firms were on the front foot as risk appetite waned, with British American Tobacco and consumer goods group Reckitt Benckiser each 0.4 percent higher.
There are no important UK economic pointers due on Monday, ahead of the pre-election budget due on Wednesday.
