Royal Bank of Scotland led the FTSE 100 1.02 per cent lower in early trade after the group warned of tough times ahead.
Despite recording a very slim profit for the first six months, compared to last year’s record loss, RBS shares slumped 12.72 per cent by 09:00 BST on a downbeat statement.
Lloyds Banking Group, which also reported first half results this week, fell by 6.06 per cent.
Yesterday, the bank had been leading the index higher after predicting the worst of the losses were behind it, but the more cautious outlook from RBS has spooked investors.
Commodities were also in the red, with Eurasian Natural Resources down by 6.25 per cent and Kazakhmys down by 6.03 per cent.
Defensive stocks regained ground after yesterday’s falls, with AstraZeneca up by 1.03 per cent and Scottish and Southern Energy up by 0.92 per cent.
Later today, investors will be looking to US jobs data, which is expected to show a worsening unemployment rate.
Last night, the Dow Jones closed 0.27 per cent lower, while the S&P 500 was off by 0.56 per cent.
Twitter: My Finances
Join the conversation at #news_myfinances