The recovery in top-flight shares ran out of steam on Thursday as concerns about the impact of the EU referendum on banks and housebuilders took hold.
The FTSE 100 Index fell 11.86 points to 6348.2, dragged down by the likes of Royal Bank of Scotland PLC (LON:RBS), whose shares dropped 5.7 points to 169.9p.
Ipek Ozkardeskaya at London Capital Group said: "Banks and financials will certainly be facing major challenges in the period ahead.
"Rising speculation of potential flights out of the City of London is whistled in the wind."
Property stocks and homebuilders also faced fresh selling pressure amid news that Singapore's UOB suspended its loan programme for London properties due to EU vote risks and uncertainty.
Taylor Wimpey (LON:TW.) backtracked 2.9 points to 129p and Berkeley Group Holdings PLC (LON:BKG) retreated 75p to 2475p.
There was also bad news on the UK economic front, where first quarter GDP growth was unrevised at a quarterly rate of 0.4%, confirming that growth slowed from an upwardly-revised 0.7% in the fourth quarter.
Among small-cap stocks, Beowulf Mining plc (LON:BEM) more than doubled in value to 7.7p on news that the Swedish government had agreed to consider its bid for an exploitation concession for its Kallak North scheme.
US oil explorer Nighthawk Energy plc (LON:HAWK) ticked up 0.285p to 1.06p after amending its banking deal with the Commonwealth Bank of Australia.
And Akers Biosciences Inc (LON:AKR) was 22.5p healthier at 192.5p as it reported success in a clinical trial of its PIFA/chlamydia rapid assay, the first rapid test for chlamydia diagnosis using a finger stick blood sample.
But China New Energy (LON:CNEL), which specialises in engineering and technology for the bioenergy sector, plunged 0.65p to 1.6p after announcing a delay in signing an investment agreement.
Back among blue chips, investment firm 3i Group (LON:III) rose 28p or 5.5% to 532.5p. The group's largest portfolio investment Action continued to grow strongly, it announced today.
Preview at 6.58am
After four trading days of volatility Thursday looks like respite, with London’s FTSE 100 expected to open only 20 points or so higher.
The relatively small increase isn’t without significance, however, as it moves the blue chip index back above pre-Brexit levels.
Tunnel vision on the FTSE 100 could convince some that everything’s gone back to ‘normal’ already, just days after the historic vote, but, plainly it is not that simple - indeed, down around 0.3% at US$1.3385 this morning the pound is still weaker against the dollar.
Michael Hewson, analyst at CMC Markets, points out that the “stunning turnaround” could end up seeing the benchmark close the higher for the month, but, he also says this would be an outlier.
In a note, he said: “it remains very much an outlier when compared to other stock markets around the world, which means we need to treat it with caution, particularly since the FTSE250 is still 7.5% down over the same period, and US stocks also remain shy of their highs last week.
“Elsewhere in Europe it’s a similar story with the DAX still nursing losses of 6%, while Italian markets have fared far worse, still languishing over 11% lower as concerns about the health of their ailing banks and economy weigh over stock markets.”
On Wall Street, the Dow Jones is about 320 points away from where they were, after closing 284 points or 1.64% higher on Wednesday. The S&P 500 added 1.7% to 2,070, while the Nasdaq rose 1.86% to 4,779.
In Asia, Japan’s Nikkei gained 0.5% to 15,645 while Hong Kong’s Hang Seng advanced 1.7% to 20,786 and the Shanghai Composite was up just a sliver at 2,933.
Australia’s ASX 200 added 1.7% to 5,230.
Brent crude was back above US$50 per barrel after rising 2.9%, while WTI crude futures were up 3.1% to US$49.40.
Gold, meanwhile, was priced at US$1,316 representing a slight fall.
Looking back to London, spreadbetting and CFD firm IG Markets sees the FTSE 100 some 20 points higher around an hour before the open, calling the index at 6,353 to 6,358.