The FTSE 100 shed 12.81 points to 4169.21 in a volatile session which began weakly after heavy falls on Wall Street overnight.

The US Treasury's decision to overhaul its bank bail-out plan unsettled markets.

The Dow Jones Industrial Average shed 5 per cent on Wednesday and was on the back foot in early trade yesterday after US unemployment claimants jumped to their biggest level since 2001's 9/11 attacks.

Wall Street recovered dramatically in its closing hour last night as investors snapped up energy shares trading at their cheapest valuations on record.

In London mounting recession fears have hindered the progress of the blue chip index this week.

Miners were among the worst hit, with Mexico gold and silver miner Fresnillo the leading Footsie casualty, off 157/8p to 1027/8p, or 13 per cent.

Lonmin and Xstrata were down 641/2p to 9441/2p and 48p to 952p, respectively, amid demand worries. Oil prices falling to fresh lows below $55 a barrel also hit the likes of prospectors Tullow Oil, down 231/2p to 4531/2p and Cairn Energy, off 67p to 1437p.

Among financial stocks under pressure in London, HBoS was down 67/8p at 90p, Barclays off 101/2p at 1573/4p and Lloyds TSB 61/4p lower at 167p.

Inter-money broker Icap was also a prominent faller, down 291/2p to 2551/4p, after Morgan Stanley downgraded the stock.

Elsewhere, London Stock Exchange fell 60p to stand at 5191/2p after it halted a share buy-back scheme and said its market was likely to remain "difficult and uncertain".

One bright spot for the market came from BT after the firm announced aggressive cost cutting measures and its half-year figures came in slightly better than recently revised expectations.

BT shares ended the session 9 per cent, or 10p, better off at 1221/2p, putting back some of the losses seen in the wake of a profits warning last month.

It was chased higher by information group Reed Elsevier, up 421/2p to stand at 5311/2p – almost 9 per cent – after a reassuring trading update.

Outside the top flight, newspaper group Trinity Mirror rose 43/4p to 34p after it increased its target for annual savings.

Bookmaker Ladbrokes was higher, up 33/4p to 1613/4p, after it said it remained on track to deliver on market expectations, in spite of some unfavourable sporting results in recent weeks.

But retailer DSG International – owner of PC World and Curry – fell after an insurer scaled back its cover against the firm being unable to pay its suppliers.

The move by the world's second largest trade credit insurer, Atradius, is part of a wider review of the retail sector but it sent shares in DSG tumbling by a third, down 9p to 191/4p

The biggest Footsie risers were Man Group up 181/2p at 2081/2p, Old Mutual ahead 41/2p at 541/4p, BT up 10p at 1221/2p and Reed Elsevier which finished 421/2p higher at 5311/2p.

The biggest fallers were Fresnillo off 157/8p at 1027/8p, Icap off 291/2p at 2551/4p, LSE off 60p at 5191/2p.