The FTSE 100 has slipped 13.6 points, or 0.3%, to 5456.4, with Vodafone Group leading the decline after the company reported earnings which missed analysts' estimates.
Vodafone, the world's largest mobile-phone operator, has dropped 9p, or 6.21%, to 136p, after it said first-half profit had fallen 23% and predicted sales growth will slow for a third year.
Diageo, the world's biggest liquor maker, also slipped 30.5p, or 3.54%, to 832p, after the company said sales have been hurt by hurricanes in the US Southeast and that costs have increased because of higher oil prices.
Meanwhile, Yell is doing its best to lead a rally as it tops the risers with gains of 10p, or 1.99%, to 512p, closely followed by Old Mutual, which has advanced 2.75p, or 1.96%, to 143.25p.
In Japan the Nikkei 225 Stock Average lost 24.27 points, or 0.17%, to 14,091.77, with banks leading the decline after Prime Minister Junichiro Koizumi signalled deflation will persist.
Koizumi said that it is premature for the Bank of Japan to abandon its policy of keeping interest rates at near zero because prices are still falling. The statement also caused the yen to drop to a 27-month low against the dollar, which helped make exporters more attractive.
Mizuho, Japan’s second-largest bank, fell 10,000 yen, or 1.2%, to 816,000, while Mitsubishi UFJ Financial Group, the world's largest lender by assets, lost 20,000 yen, or 1.3%, to 1.51 million.
Elsewhere, Seven & I Holdings, the nation's biggest retailer, also fell 100 yen, or 2.4%, to 4,090, while Mitsubishi Estate, Japan's biggest property developer by market value, lost 20 yen, or 1%, to 1,937.
Exporters were amongst the biggest gainers, including Canon, the world's largest digital-camera seller, which rose 140 yen, or 2.2%, to 6,650, as the company generated 75% of its sales overseas last year. Fuji Photo Film, the world's fifth- largest seller, also gained 70 yen, or 1.9%, to 3,830.
Honda, Japan's No.3 carmaker, added 60 yen, or 1%, to 6,320, as the company gets more than half of its sales in North America. Bridgestone also rose 30 yen, or 1.3%, to 2,395, after the company made a quarter of its sales in the US last year.
In the US the Dow Jones Industrial Average rose 11.13 points, or 0.1%, to 10,697.17, after good earnings from Wal-Mart and Lowe’s was balanced out ahead of inflation and spending data scheduled for release later this week.
Wal-Mart gained $0.30 to $49.30, after it reported a 4% increase in third-quarter profit to match analysts' expectations, while Lowe's climbed $2.92 to $64.89, after it said its earnings swelled 26% to beat Wall Street estimates by $0.04 per share.
Georgia-Pacific also jumped $12.63 to $47.28, after Koch Industries offered to buy it for $13.2bn in cash, while Host Marriott slipped $0.79 to $16.65, after it announced it is paying Starwood Hotels & Resorts Worldwide $3.3bn to acquire 38 domestic and overseas properties under the Westin, Sheraton, W Hotel, Luxury Collection and St. Regis banners. Starwood rose $0.76 to $60.02 on the news.IFAonline
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till