FTSE 100: 7252.39 ▼ -29.18 (-0.40%)
A double dose of good US economic data helped distract investors from the turmoil surrounding Donald Trump's presidency this afternoon.
After falling overnight, Wall Street opened slightly higher on news that the number of Americans applying for unemployment benefits fell to a 28-year low last month. Initial claims for jobless benefits decreased 4,000 to a seasonally adjusted 232,000 for the week to 13 May, the Labor Department said.
Meanwhile, the Philly Fed's business outlook index for May hit 38.8, more than double the 18.5 estimate of economists and up from 22 in a surprise show of strength for the US economy.
After closing 1.8% lower last night the S&P500 index gained eight points or 0.3% to 2,365 and the Nasdaq technology index put on 44 points or 0.8% to 5,624.
The US dollar index added 0.141 to 97.640 against a basket of leading currencies, although the pound held its own versus the greenback and jumped above $1.30 for the first time since September following strong retail sales for April.
After intially slumping 95 points, or 1.3%, the FTSE 100 clawed back some ground to close 69 points or 0.9% down at 7,434.
Trump continued to be in focus, though, as he tweeted his dismay at the appointment of former FBI director Robert Mueller to investigate possible collusion between the president's campaign and Russia.
'This is the single greatest witch hunt of a politician in American history!' he said on Twitter in response to speculation that he could face impeachment.
Michael Hewson, chief market analyst at CMC Markets UK, said the crisis had 'delivered investors the kick in their complacency that many had been warning about, as stock markets and the US dollar fell sharply, while safe haven assets like gold surged'.
'President Trump has enjoyed an almost Teflon-like existence since being in the White House with markets prepared to give him the benefit of the doubt on a number of occasions despite his tendency to stagger from one controversy to another,' he added.
'This latest one involving ex-FBI head James Comey has sparked concerns that this could be Trump's Watergate moment.'
Chris Beauchamp, chief market analyst at IG, the broker, said: 'The rally is small and in no way really changes the bearish picture that was created yesterday - once options expiry and the weekend is out of the way there is a high probability that the selling will resume,' he said.
Burberry (BRBY) was a rare big blue chip riser, up 77p or 4.7% to £16.60, after the luxury goods group unveiled 10% increases in full-year sales and profits.
Shell (RDSb) trading without entitlement to its latest dividend was the biggest faller, down nearly 4% at £21.76.
The FTSE 250 was also down, 0.4% lower at 19,691, buoyed by Berendsen (BRSN), which soared 21% to £10.50 after the laundry services group rejected a £2 billion takover bid from French rival Elis (ELIS.PA).