The FTSE 100 eased 11.58 points to 5,702.24 while the FTSE 250 dropped 39.73 points to 10,773.07.
Suffering from a bout of profit-taking were the banks, with Lloyds Banking Group falling 1.92 to 35.15p and Royal Bank of Scotland sliding 0.98 to 26.29p.
4.30pm: Shire slips on results as Wall Street wavers
Wall Street has recovered from earlier losses, with the Dow Jones Industrial Average rising 16 points to 1224. Back on this side of the Atlantic, the FTSE 100 is down 18 points to 5694.
Drug maker, Shire, has joined the retreat, slipping 0.9pc. That comes despite the pharmaceutical company posting a 24pc rise in third-quarter revenue to $1.1bn.
Angus Russell, Shire chief executive, said it was a strong quarter for the company, helped by sales of its hyperactivity medicines in the United States as children returned to school.
Shire's rare diseases franchise has also benefited from long-running manufacturing problems at U.S. biotech company Genzyme, bought earlier this year by Sanofi.
Analysts at Morgan Stanley said they saw Shire as an "attractive proposition", adding:
We believe Shire is well on the way to delivering revenue growth of 15% per annum until 2015, with the potential for double digit growth thereafter. We expect this will be accompanied by operating leverage and significant cash generation. We believe the market still underestimates the earnings power and cash generation of the business.
Advertising giant, WPP, put on 1.9pc as sought to reassure the market with a pledge of improving margins on Friday, after it cut as expected its 2011 outlook due to slowing growth in the US and the euro zone debt crisis.
Martin Sorrell's WPP said preliminary forecasts for the full-year indicated like-for-like revenue growth of 5pc, compared with a previous forecast of 5.9pc, lowering its expectations for the fourth quarter.
But the group, whose ad agencies include JWT and Ogilvy & Mather, said it expected operating margins to improve more than forecast due to its still solid revenue growth and strong cost control.
2pm: Man Group beats a retreat as FTSE slips
Having made moderate gains this morning, the FTSE 100 is now slipping into the red, easing 14 points to 5699 after a weak Italian bond auction.
Man Group is the large-cap's sharpest faller, sliding almost 6pc as investors fret about the world’s largest hedge fund's first-half results next week. Bank of America-Merrill Lynch wrote today that it sees “significant cuts” in first half 2012 performance fees, but reiterated its "buy" rating.
Financials are out of favour, with Lloyds Banking Group sliding 4.5pc and Royal Bank of Scotland falling 3.8pc.
Amongst the second-liners, Elementis is up 7pc after the the chemicals group says third-quarter trading is ahead of last year and it expects to meet expectations for the full year.
Charles Pick, an analyst at Numis, said:
There is no assurance that trading will remain as strong in 2012 but the track record of the current management team is a good one.
But, bwin.party dropped 5pc on fears that online gambling operators still face a difficult regulatory regime in Germany. On Thursday, 15 of the 16 German states agreed to lower a proposed tax on online gambling turnover to 5pc from the original 16.6, and will issue 20 licences, up from the seven previously proposed. But, this form of tax is regarded as more detrimental and analysts thought it still meant that Germany was not a very attractive market for the likes of bwin.party.
10.30am: Blue-chips take a breather following Thursday's gains
London's blue-chips are pausing for breath this morning after yesterday's jump of almost 3pc. The FTSE 100 is up just 7 points to 5720.
While banks are still in the lead, with HSBC putting on 3.4pc and Barclays advancing 1.5pc, oil and gas stocks are weighing on the index, with Royal Dutch Shell losing 2.5pc.
Joshua Raymond, chief market strategist at City Index, commented:
The pace of the gains we have seen over the last 24 hours has certainly slowed somewhat, and this is only natural considering that much of yesterday’s gains were built on both adrenaline and sheer relief that widespread agreements were reached.
Once that adrenaline recedes, investors start to look at the bigger picture and so on that basis one could say that we are now more likely to see the true investor reaction to the euro deal. The fact that we have not seen European stock markets open to losses this morning with investors locking in their profits early is a positive sign and what we now need to see is investors using these gains as a platform to encourage more share demand and push prices higher.
Amongst those stocks on the wane this morning is International Airlines Group, as UBS reduces its target price for the merged British Airways and Iberia to 240p from 260p in a preview of third-quarter results due on November 4.
UBS, which has a "buy" on IAG, says that, in its view, fuel and airport charges are likely to weigh on the airline's Q3 numbers.
Although IAG has hedged over 50 percent of Q3 fuel requirements, Jet kerosene prices are up 46 percent for the quarter compared to a year ago. We do not think that the full cost of the increase will be absorbed by customers and the fuel hedge. Additionally Heathrow landing fees increase by mid single digits from 1 July.
7am: Asian stocks posted a second day of gains on eurozone deal
Japan's Nikkei jumped 1.2pc to 9,030.85 as Asian stocks posted a second day of gains on the European news. Hong Kong's Hang Seng gained 1.9pc and Australia's S&P/ASX 200 added 0.1pc.
After two years of unsuccessful attempts to address the continent's debt problems, European leaders unveiled a deal on Thursday aimed at preventing the Greek government's inability to pay its debt from escalating into another financial crisis.
Banks are being asked to take 50pc losses on the Greek bonds they hold. Europe will also strengthen a financial rescue fund to protect the region's banks that will also be used to insure some potential losses on the debt of weak eurozone economies like Italy, which is considered too big to bail out.
However some analysts cautioned that Europe was still at risk, since mapping out the rescue plan was simple, compared to the complex and costly task of implementing it.
Francis Lun, a Hong Kong-based analyst, said:
I think there is euphoria of Europe finally solving its problems. But the question is, how do you finance the financial stability fund? Who is supposed to pay for it? That is left blank.
For the moment, Greece will not go under. That is all we know. But the commercial banks will take a big hit. That will really kill them.
Figures out yesterday also showed the US economy grew at a 2.5pc annual rate from July through to September, on stronger consumer spending and business investment. That was nearly double the 1.3pc growth rate in the previous quarter.
As a result, the Dow Jones soared 2.9pc to 12,208.55 - its largest jump since August. The S&P 500 rose 3.7pc.
The FTSE 100 also soared yesterday, to 160.58 points to 5713.82 and the FTSE 250 jumped 310.96 points to 10733.34.
Since touching a low of 4944 on October 4, the UK's large-caps have leapt 15.6pc, taking them close to so-called bull market territory.
Friday's market report
Thursday's market report
Wednesday's market report
Tuesday's market report
Monday's market report