The FTSE 100 Index fell back below the 5700 mark yesterday despite excitement over strong figures from Severn Trent and the proposed sale of airports operator BAA.
The pair were among just half a dozen blue chip stocks to finish the session in positive territory.
The Dow Jones Industrial Average was nearly 100 points lower when the Footsie closed 92.3 points down at 5669.8 today.
It came after Federal Reserve chairman Ben Bernanke suggested interest rates may have to rise in the United States to keep inflation down.
CMC Markets analyst James Hughes said: "The Footsie followed big losses on Wall Street with heavy losses of its own.
"The market opened up sharply down this morning after Ben Bernanke spoke of yet more rate rises in order to keep inflation under control.
"Interest rates continue to be at the forefront and will continue this trend for the rest of the week, as the European Central Bank announce their rate decision on Thursday."
BAA grabbed the headlines in London after it backed a £10.3 billion takeover offer from Spanish consortium Ferrovial despite strong interest from US bank Goldman Sachs.
The Ferrovial offer put a value of 950.25p on BAA shares, including a 15.25p dividend payment, and shares in the Heathrow and Gatwick owner lifted 20p to 948p.
It was beaten to the top of the blue chip risers board by water company Severn Trent after it posted a 13.9 per cent increase in group turnover to £2.29 billion, with profits at the bottom line ahead by 18 per cent to £270 million. Shares lifted 45p to 1202p.
But there was gloom elsewhere as a drop in the price of copper and gold dented the mining sector, with Xstrata 119p lower at 1939p, Anglo American off 104p to 1992p and BHP Billiton down 46.5p to 992.5p.
Oil stocks also weighed heavy on the market with Royal Dutch Shell off 38p to 1807p and BP down 8p to 628p.
And the insurance sector was in retreat with Prudential down 14.5p to 562p, Friends Provident off 4.25p to 174.25p and Royal & Sun Alliance 2.5p weaker at 127p. Elsewhere, shares in hi-tech plastics firm Victrex cheered five per cent, or 33p to 733p, after reporting first half profits were up 32 per cent, with sales still strong and confidence high for the future.
And Carphone Warehouse added 8.5p to 340p as investors cheered the success of its "free" broadband service, which has signed up 340,000 customers since its launch, almost twice as many as expected.
Meanwhile, shares in Regent Inns, the owner of the Walkabout and Bar Risa chains, dropped 15 per cent, or 16p to 90p, after it revealed talks over a bid for the group had ended and said trading conditions continued to be difficult.