The FTSE 100 fell by midsession on Thursday, as uncertainty over plans to rescue the euro zone shrouded the outlook for equities, with financials and commodity stocks bearing the brunt of the selling.
A split between the IMF and the European Union is threatening to delay Greece's next aid payment in another blow to European efforts to stem the debt crisis.
That followed the admission by French President Nicolas Sarkozy that plans to tackle the euro zone debt crisis had stalled, ahead of this weekend's European leaders' summit.
The UK's benchmark was down 34 points or 0.6%at 5,416.83, off the intraday low of 5,363.16, as U.S. index futures pointed to a firmer opening on Wall Street.
"I am still surprised quite how strong equity markets are, given the potential for disappointment from this weekend's deadline," Louise Cooper, markets analyst at BGC Partners, said.
"Financial markets are not normally known for their patience and yet for the time being, they are giving our political leaders and central bankers that most precious of commodities, time."
A document including the suggestion the European Financial Stability Facility could buy bonds on the secondary market, although only if the euro zone country has sustainable debt, also helped investors looking for clarity on how policymakers were planning to deal with the region's debt crisis
Bond futures fell and the euro rose after the guidelines were released.
APPROACHING THE END
Credit Suisse analyst Andrew Garthwaite said a releveraged European Financial Stability Facility of between 1.5 and 2.0 trln euros is required and that would be enough if growth returns and fiscal commitments are maintained.
Deutsche Bank was more upbeat over the situation, saying the European crisis was approaching an end.
"While the focus is on estimating the costs, the market believes that a European recession and dilution to banks' shareholders is a small price to pay compared to the alternative, continued spreading of the crisis."
Deutsche Bank said this could lead to a further reduction in the global cost of capital, eventually pushing the market up around 10%.
Among UK stocks, on the downside miner Anglo American shed 1.7% after posting a 9% drop in copper output in the third quarter.
Elsewhere, set-top box maker Pace fell 14% after warning on full-year profit.
There was better news for the retailers though following Home Retail's poor results on Wednesday as British retail sales grew more than expected in September, official data showed.
Retailers Next and Marks & Spencer were among the top risers, up 2.8 and 3%, respectively.
Sentiment in the sector was lifted earlier on as Debenhams, Britain's No. 2 department store group, up 8.5% reported a forecast beating 10% rise in full-year profit and winning market share.
On the macroeconomic front, across the Atlantic, the latest U.S. weekly jobless claims are due at 1230 GMT, and U.S. September existing home sales data and the October Philly Fed index are both out at 1400 GMT, as investors look for clues as to the health of the world's biggest economy.
