World markets remained in the red on fears over the global economy as President Barack Obama pledged to tackle America’s looming fiscal cliff as "urgent business".
London’s FTSE 100 Index closed another 1.3% or 72.2 points lower at 5605.6 after hitting a two-month low yesterday, while the Dow Jones Industrial Average on Wall Street declined around 0.4% in early trading.
There were similar falls in Europe, with the Dax in Germany 1.3% lower.
Stock markets globally have endured a rocky ride since the US presidential election amid ongoing fears that President Obama will be unable to strike an agreement to avoid America’s fiscal cliff.
In his first meeting with US congressional leaders to discuss the issue, he appealed for co-operation and compromise to "reduce our deficit in a balanced way".
Persistent eurozone concerns helped strengthen the pound against the single currency, to 1.25 euros.
But sterling was lower at $1.59 following worrying news for the UK economy after retail sales figures yesterday showed a sharp slide in October.
The biggest FTSE 100 risers were IMI up 16p to 958p, Serco ahead 5.5p to 550p, Compass Group 4.5p higher at 692p and Polymetal International up 7p to 111p.
The biggest FTSE 100 fallers were Melrose down 27.1p to 208.9p, Eurasian Natural Resources off 14.8p to 259.6p, Pennon Group 29p lower at 599.5p and Lloyds Banking Group down 1.7p to 44p.