The FTSE 100 fell 18.48 points, or 0.3 percent, to 5,527.16, recording its first weekly loss since late September.
A G20 meeting in Cannes ended on a low note when German Chancellor Angela Merkel said hardly any of the participating countries had committed to contributing to the fund, while hopes the International Monetary Fund may come to the rescue were quashed by its head.
I am pretty disappointed. There was a lot of rhetoric but no decision, so there is still a lot of uncertainty as to what is going to happen, said Neil Marsh, a strategist at NewEdge.
Everyone is looking at the macro(economic situation) and the macro is Europe. Until that is clarified, caution is going to rule the day.
All eyes now turn to Athens, where Prime Minister George Papandreou faces a confidence vote on Friday evening. While the country's bailout deal was expected to go through, there remains strong concerns about the implementation of needed austerity cuts. .
The FTSE had spiked higher mid-session on the back of U.S. data showing a fall in the unemployment rate.
A big upward revision to September's payrolls on both non-farm and private fronts helped increase investor appetite for risk, albeit briefly, Joshua Raymond, City Index's chief market strategist, said.
The weaker close was thanks to the lack of anything concrete out of the G20 meeting ... although there is not that much in it and the index is not making any major moves, the head of sales at a British brokerage said.
People are positioning with extreme caution, given how the market has been bouncing around and so inconsistent, he said, citing moves into defensives and cash as common themes. It is not a time for big position taking. sentiment is vulnerable.
That market structure was pushing out longs and shortening trade timeframes. Even hedge funds were being cautious as it was such an unpredictable outcome at the moment, the head of sales said.
Intraday technical charts confirmed the cautious mood. December FTSE futures were trading at 5,515 after hitting resistance at 5,592, Nicolas Suiffet at Trading Central said.
The 30-minute RSI is bearish but is holding above its horizontal support ... The configuration is mixed. A further consolidation is likely ahead of a new up leg, he said.
Earnings also proved mixed and a handful of positive results unable to overturn the broader negative sentiment.
International Consolidated Airlines Group shaved off the most index points, closing 6.8 percent lower after posting a 31 percent fall in third-quarter profit and confirming plans to buy Lufthansa's British unit, bmi.
Smith & Nephew , down 1.4 percent, recorded volumes nearly three times its 90-day average after Europe's largest artificial hip and knee maker posted a 9 percent decline in third-quarter trading profit.
Helping stem the index falls, Royal Bank of Scotland , down nearly 50 percent over the past year, closed up 1.3 percent as analysts and investors said they were reassured by its capital position when it reported earnings.
Chip designer ARM Holdings rose 7 percent, topping the gainers' list on news U.S. microcontroller maker Microchip called the bottom of the cycle when it reported third-quarter results on Thursday.