Slumping coal prices hit heavyweight miners, with BHP Billiton , Xstrata , Vedanta Resources , Antofagasta , Anglo American , Eurasian Natural Resources and Rio Tinto all down sharply.

AstraZeneca , however, topped the FTSE 100 gainers, up 4.8 percent after the group won a key U.S. patent battle over its second-biggest selling drug, Seroquel, for schizophrenia and bipolar disorder.

The sector also gained on hopes that its defensive qualities would come to the fore as shares of retailers and housebuilders wilted. GlaxoSmithKline advanced 3.9 percent.

Dresdner Kleinwort said large-cap pharmaceutical stocks offered relative outperformance, since they had a degree of earnings protection, adding that there could be upgrades over the second-quarter results season.

Index heavyweight Vodafone added 3.5 percent as traders cited its defensive quality.

On Thursday, all eyes will be on the interest rate verdict from the European Central Bank and data on U.S. non-farm payrolls.

M&S LOSES SPARKS

Marks & Spencer, which has a 0.39 percent weightage on the index, slumped nearly 25 percent after it issued a shock profit warning and said a consumer downturn was likely to be deeper, and last longer, than previously expected.

The share price fall wiped off more than 1.2 billion pounds from Marks & Spencer’s market capitalisation.

Within the sector, Next , Kingfisher , Sainsbury and Tesco shed between 4.8 and 7.9 percent.

Adding to the gloom, figures from the Bank of England showed Britons extracted less cash from their homes in the first quarter of this year, suggesting tighter credit conditions are sapping a key driver for consumer spending.

"The overall global market is likely to continue to decline and obviously the UK is not going to be immune from that," said Peter Dixon, UK economist at Commerzbank.

"Because consumers are facing a squeeze on incomes, because retailers are facing a rise in costs, then obviously they can’t easily cut costs to maintain volumes. It’s a difficult situation."

FTSE 250-listed Taylor Wimpey pulled the housebuilding sector lower, plunging over 46 percent after it said the housing market would remain weak at least through 2008 and that it had not been able to conclude a satisfactory raising of equity due to market conditions.

Peeers Barratt Developments , Persimmon , Bovis Homes , Redrow and Bellway dropped between 8 and 29 percent. Blue-chip Wolseley , a building materials distributor, fell 9 percent.

Meanwhile, a survey showed construction activity fell at its sharpest pace in at least 11 years in June as housebuilders cut their operations at a record pace.

The mid-cap FTSE 250 <.FTMC> index, whose companies have less international exposure than those on the blue chip index, ended down nearly 3 percent.

(Additional reporting by Michael Taylor and Atul Prakash; Editing by David Cowell)