A convoy of 280 trucks that Russia said were carrying humanitarian aid for Ukraine set off on Tuesday, amid Western warnings to Moscow against using help as a pretext for an invasion. Ukraine also reported that Russia had massed 45,000 troops on its border.

Evidence that Ukraine was affecting Germany, Europe's biggest economy, came from a decline in the ZEW survey on investor morale, the ZEW think tank said.

The FTSE 100 was down 4.72 points, or 0.1 percent, at 6,628.10 by 1105 GMT, after gaining 1 percent on Monday, following a decision by Russia to pull troops back from near the Ukrainian border.

But Prudential advanced 1.6 percent after it reported a 17 percent rise in first-half operating profit and raised its interim dividend by 15 percent. Fee income from its U.S. business and better sales for health and protection products in Asia boosted the results.

"This is a particularly impressive performance given the tough forex and political headwinds that the group has had to contend with in H1 2014," Shore Capital said in a note.

It repeated its "buy" rating on the stock, echoing the view in the broader market; of the analysts with ratings on the stock, almost 90 percent reckon Prudential is either a "buy" or a "strong buy", according to Thomson Reuters Starmine.

But concerns about Russia's involvement in Ukraine hampered the broader market. Trading volumes were thin, around a quarter of the 90-day daily average at mid-session. On Monday, volume had reached just three quarters of the average - a product of the summer lull and investor reluctance to place big bets amid the turmoil in Ukraine and the Mideast.

"Worth staying on the sidelines for now and see how the geopolitical situation develops," said Lex van Dam, a hedge fund manager at Hampstead Capital.

Hargreaves Lansdown was the worst FTSE 100 performer in percentage terms, falling 2.8 percent after investment bank UBS opened coverage of the stock with a "sell" rating.

The FTSE 100 hit a peak of 6,894.88 points in mid-May, which marked its highest level since December 1999. It has since retreated and is down 1.8 percent since the start of 2014.

"The geopolitical tensions are going to be a drag on equities for a while," said Hantec Markets analyst Richard Perry.

(Additional reporting by Sudip Kar-Gupta; Editing by Larry King)

By Tricia Wright