Britain's top shares ended lower on Tuesday, retreating from the previous session's one-month highs as cheaper oil hit energy stocks and medical devices maker Smith & Nephew unexpectedly cut its sales forecasts.
Global oil prices held below $64 a barrel, more than $7 away from the record highs scaled in the aftermath of Hurricane Katrina, and dragged on heavily weighted oil stocks.
"The oil price seems to be trending down at the moment," HSBC Securities UK equity strategist Robert Parkes said. "If that continues it will give the (global) market a little boost, but probably less so in the UK, given we have got a high oil sector weighting."
The FTSE 100 share index closed 37.1 points, or 0.7 percent, down at 5,338.0 points - its lowest finish in a week, with oil and gas stocks accounting for almost a third of the benchmark's losses.
Shares in BG Group fell 2.5 percent, while BP was off 1 percent and Royal Dutch Shell lost 0.8 percent.
Smith & Nephew was the heaviest FTSE faller, off 6.4 percent after it unexpectedly cut its full-year sales and profit forecasts, blaming the disruption caused by Katrina on southern US hospitals .
The shares had been under pressure earlier on rumours of a share placing and after investment bank Merrill Lynch said in a note it was concerned about margins and sales growth at the company.
US equity markets also fell on growing concerns consistently higher energy prices would affect consumer spending and company profits.
The FTSE index hit its highest level in a month and nudged close to a four-year high of 5,386.4 set on August 10, prompting some strategists to see the day's losses as a mild correction.
"We have had a fall today but it is a fall off a very high level relative to the last couple of years," Michael O'Sullivan, a strategist at State Street Global Markets, said. "We are not in 'the market is going to collapse' camp yet, but at the same time markets are less bullish."
Some chartists warned the FTSE could fall further if it failed to rise above the August 10 high and hold above it.
"This will act as a significant 'sell' signal and could force the market lower for the remainder of September, which historically is a poor month for equity markets," Finspreads head of sales and marketing Angus Campbell said in a note. "The FTSE 100 looks to be in the process of forming what technical analysts call a 'double top'."
MID-CAP MISYS TUMBLES:
Among mid-cap players, software maker Misys lost nearly a fifth of its value after warning on first-half earnings . Misys, which specialises in banking and healthcare software, said it was not sure the shortfall would be made up in the second half.
Sector peer and FTSE 100 member firm Sage Group fell 2.3 percent in sympathy.
On the upside, mid-cap aerospace firm Cobham jumped 10.3 percent to head the FTSE 250 index after it revealed rising mid-year profits while leisure mid-cap Rank Group gained 6.5 percent on take-over talk.
Elsewhere, rumoured takeover target Rentokil Initial advanced 2.5 percent on media reports businessman Gerry Robinson would appeal to analysts over his plans to turn the support services firm around.