The Footsie closed down as falling oil prices kept global markets under pressure, but Tesco shares surged after it revealed better-than-expected Christmas trading.
The FTSE 100 Index fell 42.7 points to 5918.2 after Brent Crude slumped to a 12-year low, below 30 US dollars a barrel at one stage.
However, the London market recovered from more than a 100-point fall, after New York's Dow Jones Industrial Average jumped almost 200 points in early trading as investors eyed strong company earnings.
Interest rates were held once more at 0.5% as the minutes of the Bank of England's decision revealed policymakers believe growth in the months ahead will probably be weaker than they predicted in November and that inflation is set to stay lower for longer.
Despite the gloomy minutes, sterling gained ground against the US dollar after recent heavy falls.
The pound edged slightly lower to just under 1.44 US dollars, and was just ahead against the euro at 1.32.
Elsewhere in Europe, the Dax in Germany was 1.4% lower, while the Cac 40 in France dropped 1.3%.
The slide in London reversed two days of gains, after a torrid period last week which saw £85 billion wiped off top-flight shares due to a run of poor economic data and interruptions to trading on Chinese markets.
Among stocks, Tesco shares jumped after it posted a surprise rise in sales over Christmas, with UK like-for-likes up 1.3% over the six weeks to January 9.
It posted a third-quarter sales dip of 1.5%, but hailed a "strong Christmas".
Analysts at Bernstein said recent trading at the supermarket "suggests that the company is well on the way to recovery".
Shares rose 6%, or 9.7p, to 168p.
Argos owner Home Retail Group warned over profits after the FTSE 250 firm said the chain suffered falling sales amid "mixed" trading over Christmas.
Home Retail - which on Wednesday night revealed talks to sell its DIY arm Homebase and rejected a takeover approach for the wider business from Sainsbury's in November - posted a 2.2% fall in sales at established Argos stores for the 18 weeks to January 2.
Shares in the group lifted, 3.3p to 152.7p, as analysts cheered its plan to sell Homebase to Australian retail giant Wesfarmers for £340 million.
Also in the FTSE 250, JD Sports gained 4%, or 44p, to 1102p, after it said like-for-like sales in the five weeks to January 2 jumped 10.6%, and that it expected full-year profits before tax to beat forecasts of £136 million by up to 10%.
The biggest risers in the FTSE 100 Index were Anglo American up 31.5p at 263p, Glencore up 6.8p at 78.6p, Tesco up 9.7p at 168p and BHP Billiton up 37.4p at 657p.
The biggest fallers in the FTSE 100 Index were InterContinental Hotels Group down 179p at 2309p, Carnival down 250p at 3649p, Merlin Entertainments down 23.1p at 406.7p and Inmarsat down 56p at 1055p.
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