The FTSE opened around 15 points lower this morning, tracking steep losses seen in US, as the political brinkmanship over the debt ceiling continued into its second week.
Miners, a typically volatile and cyclical sector, were seen taking the brunt of the decline, with retailers - particularly M&S and Next - also suffering strong falls.
"The government shutdown has now entered its second week and still, a deal on the budget and the debt ceiling are no closer to being done. The longer this goes on, the more we're going to see this uncertainty in the markets turn into negativity," said Market Analyst Craig Erlam from Alpari.
ITV provided a ray of light, after Exane BNP reportedly raised its target price on the stock.
In marco news, the RICS house price balance continued to rise in September, to the 54.0 point mark from 41.0 in the month before. The consensus estimate had been for just a slight increase, to 42.0.
Similarly, the price expectations balance increased to its highest since May 2002, but there was a decline in the new buyer enquiries, suggesting a small loss of momentum in activity.
Meanwhile, the government has launched a mortgage guarantee scheme in a bid to aid those wanting to purchase their own home, and giving banks the opportunity to offer high loan-to-value mortgages. The second phase of the 'Help to Buy' scheme comes into effect this week, some three months earlier than originally planned.
National Grid has warned that this winter will see the highest risk of electricity blackouts in six years - made worse by the plunging output from the nation's 5,000 wind turbines.
Looking across the Channel, investors will turn to the release of data in the Eurozone including the German trade balance and German factory orders.
The German reports will be released amid uncertainty over which party Chancellor Angela Merkel's Christian Democrats will form a coalition with in order to end a hung parliament.
Opposition party Social Democrats have signalled their readiness to join the conservative Christian Democrats while a top aide for Merkel has suggested a partnership with the Greens was a realistic possibility.
FTSE 250: Ferrexpo delivers record production result
Ferrexpo, the Swiss head-quartered iron ore company, has produced a record amount of 65% iron pellets from its own ore this year so far, the group said Tuesday. Total pellet production was up 12.5% in the year-to-date, with production for September coming to 970.4kt.
Insurer Direct Line has agreed to sell its life insurance arm to closed book specialist Chesnara and return the profit to shareholders. The pair have agreed a £62m fee for Direct Line Life Insurance, which parent Direct Line said it expected to result in a £12m gain.
Materials group Victrex said sales volumes picked up in the second half of the year, after good progress across its industrial and transport markets, adding that its order book for October is reassuring. Full-year sales volumes were slightly ahead of last year at 2,920 tonnes from 2,904 tonnes in 2012, following a robust second half performance, with sales volume approximately 10% ahead of the first half year.
Civil engineer Atkins has won a £75m deal to design three of the six lines of the new Riyadh Metro in Saudi Arabia. Atkins will lead a design joint venture with Spanish consultancy Typsa for the FAST consortium, comprising FCC, Samsung, Alstom, Strukton and Freyssinet, which is responsible for metro lines 4, 5 and 6, representing just over a third of the total track.
FTSE 100 - Risers
ITV (ITV) 185.00p +1.76%
Sports Direct International (SPD) 682.50p +1.19%
ARM Holdings (ARM) 980.00p +1.03%
Aviva (AV.) 426.40p +0.90%
CRH (CRH) 1,502.00p +0.87%
Experian (EXPN) 1,163.00p +0.61%
Tate & Lyle (TATE) 745.00p +0.61%
Capita (CPI) 1,009.00p +0.60%
BAE Systems (BA.) 452.70p +0.60%
Melrose Industries (MRO) 298.30p +0.57%
FTSE 100 - Fallers
Marks & Spencer Group (MKS) 464.30p -3.33%
BHP Billiton (BLT) 1,771.50p -1.69%
Glencore Xstrata (GLEN) 326.10p -1.61%
Rio Tinto (RIO) 2,960.00p -1.33%
Next (NXT) 4,964.00p -1.31%
Tullow Oil (TLW) 992.50p -0.95%
Vedanta Resources (VED) 1,052.00p -0.85%
Lloyds Banking Group (LLOY) 73.71p -0.83%
Kingfisher (KGF) 365.00p -0.82%
Amec (AMEC) 1,068.00p -0.74%
FTSE 250 - Risers
Telecom Plus (TEP) 1,309.00p +5.56%
Ocado Group (OCDO) 452.00p +5.43%
Victrex (VCT) 1,601.00p +2.37%
Fidessa Group (FDSA) 1,944.00p +1.89%
Computacenter (CCC) 532.00p +1.82%
Howden Joinery Group (HWDN) 296.50p +1.79%
Spirent Communications (SPT) 128.30p +1.42%
Atkins (WS) (ATK) 1,124.00p +1.26%
AL Noor Hospitals Group (ANH) 834.00p +1.09%
Menzies(John) (MNZS) 797.00p +1.08%
FTSE 250 - Fallers
Ferrexpo (FXPO) 172.00p -3.10%
Dixons Retail (DXNS) 45.23p -2.69%
Home Retail Group (HOME) 167.00p -2.57%
COLT Group SA (COLT) 117.00p -2.50%
Wetherspoon (J.D.) (JDW) 711.00p -2.27%
Debenhams (DEB) 101.20p -2.13%
Afren (AFR) 136.30p -1.59%
Kazakhmys (KAZ) 249.10p -1.50%
Polymetal International (POLY) 601.50p -1.47%
Alent (ALNT) 330.00p -1.35%