The blue-chip FTSE 100 index <.FTSE> closed down by 0.9 percent at 6,487.97 points. Last week, it had extended a rebound off 15-month lows reached in October.

Utility stocks dominated the list of the FTSE's worst performers.

British Gas owner Centrica fell 2.3 percent. United Utilities declined by 2.1 percent, SSE fell 2 percent while Severn Trent fell 1.6 percent.

Traders said the sector had been hit by a note from Investec, which started its coverage of United Utilities and Severn Trent with a "sell" rating.

They added that utilities had fallen out of favour as a result of last week's stock market rebound, which led investors to prefer sectors that tend to outperform in a rising market, such as banks, over more defensive plays such as utility stocks.

"I'm still a fan of the utility stocks due to their chunky dividend yields, but I wouldn't buy them at current levels," Berkeley Futures associate director Richard Griffiths said.

HSBC'S PROFITS FALL

HSBC shares fell 1.8 percent to 627.90 pence after the bank missed expectations with a 12 percent drop in underlying third-quarter earnings.

It also set aside $378 million to cover a potential settlement with a British regulator for alleged manipulation of currency markets.

"The results are OK, but I wouldn't want to buy them at these levels. I'd rather buy HSBC shares around the 600 pence level. There are still too many ongoing regulatory issues with them," Beaufort Securities sales trader Basil Petrides said.

Among stocks outperforming the weaker overall market were budget airline easyJet, which rose 2.7 percent after rival Ryanair raised its profit forecast, while traders cited ongoing bid speculation as causing a 10.3 percent jump in the shares of online grocer Ocado.

The FTSE hit a peak of 6,904.86 points at the start of September, its highest since early 2000, but then slumped to 15-month lows in October as weak European economic data knocked back stock markets.

The index then rebounded last week, but it remains down by around 4 percent since the start of 2014.

(Additional reporting by Alistair Smout and Alasdair Pal; Editing by Jane Baird and Ruth Pitchford)

By Sudip Kar-Gupta