Investors were also treading cautiously ahead of the latest UK inflation data which is expected to show that annual consumer-price rises eased further to 1.4 per cent in September, from a five-year low of 1.5 per cent in August.

Jameel Ahmad, market analyst at FXTM, said that inflation is expected to remain “way below” the Bank of England’s (BoE) target of 2%, which is seen as a threshold for policymakers to consider an increase in interest rates.

“Confirmation of this should signal to investors that although the BoE appear to remain on track to raise rates in spring, they are under no pressure to raise rates any sooner,” he said.

Meanwhile, the bad news for Germany’s economy is set to continue on Tuesday with the closely-watched ZEW economic sentiment survey forecast to drop to 0 in October, from 6.9 the month before.

Corporate updates disappoint

Burberry delivered double-digit underlying growth in the first half but shares in the high end fashion group slumped in morning trade after the firm said that it has experienced a “more difficult external environment” with a softening in growth from Chinese consumers both home and when travelling.

Top line growth became flatter in the second quarter at SABMiller due to a decline in lager volumes and weakness in China and Australia, with results also likely to be hit by currency headwinds.

Financial services group Hargreaves Lansdown disappointed despite reporting record assets under administration in the first quarter, as it said that investor confidence took a hit after the recent volatility across global markets.

The share price of Michael Page International dived after the recruitment firm delivered a profit warning, saying that its full-year bottom line would be “modestly lower than consensus market expectations”. The company said it was more cautious than it was previously on the short-term outlook in a number of international markets.

Similarly, luxury handbag maker Mulberry saw shares drop over 20 per cent after saying that trading conditions in the first half were “more difficult than expected” and that full-year profits would be significantly lower than market expectations.

On a positive note, mining stocks were performing well including Rio Tinto, Anglo American, BHP Billiton and Glencore.

Oil and gas group Afren was a high riser after saying it has fired its chief executive officer Osman Shahenshah and chief operating officer Shahid Ullah for gross misconduct after an independent review found they had received unauthorised payments.

FTSE 100 – Risers
Rio Tinto (RIO) 3,166.50p +2.48%
Anglo American (AAL) 1,419.00p +2.23%
ARM Holdings (ARM) 839.00p +2.07%
Fresnillo (FRES) 793.50p +1.93%
BHP Billiton (BLT) 1,684.00p +1.42%
International Consolidated Airlines Group SA (CDI) (IAG) 327.80p +1.14%
IMI (IMI) 1,145.00p +0.88%
CRH (CRH) 1,293.00p +0.86%
Glencore (GLEN) 323.35p +0.86%
Persimmon (PSN) 1,299.00p +0.78%

FTSE 100 – Fallers
Burberry Group (BRBY) 1,413.00p -4.46%
Hargreaves Lansdown (HL.) 839.00p -4.11%
St James’s Place (STJ) 667.50p -1.62%
Legal & General Group (LGEN) 219.60p -1.48%
Aviva (AV.) 489.80p -1.45%
InterContinental Hotels Group (IHG) 2,135.00p -1.39%
Randgold Resources Ltd. (RRS) 4,321.00p -1.37%
Standard Life (SL.) 380.10p -1.30%
BP (BP.) 427.00p -1.15%
Admiral Group (ADM) 1,246.00p -1.11%

Source: ShareCast