The FTSE 100 <.FTSE> fell 0.6 percent, breaking a three-day winning streak in the wake of European indexes, which edged back after a set of cautious minutes from the U.S. Federal Reserve.

Banks RBS (>> Royal Bank of Scotland Group), Standard Chartered (>> Standard Chartered), and Barclays (>> Barclays) were among the biggest fallers. They helped financials take 21 points off the index overall after several Fed members called for halting interest rate hikes following recent weak inflation.

Banks benefit from higher interest rates that bolster their margins, and the prospect of slower rate hikes dented the sector globally. The FTSE 350 banking index <.FTNMX8350>, which had outperformed the FTSE 100 recently, fell back 1.6 percent.

Index levels were little changed after retail sales data that showed a slowdown in July after a strong second quarter.

"We are going through a slight bit of the summer doldrums, and you're seeing some evidence of a slowdown in things like the housing market," said Paul Mumford, UK fund manager at Cavendish Asset Management.

Europe's largest home improvement retailer Kingfisher (>> Kingfisher) led losers, down 4 percent after it reported another decline in quarterly sales, weighed by its B&Q business in the UK and weak sales in French chains Castorama and Brico Depot.

"As feared, the impact of the UK housing slowdown is now more clearly apparent, with B&Q second quarter like-for-like sales undershooting expectations at -4.7 percent," Jefferies analysts said in a note.

The retailer's "discount" valuation would likely persist for now, they added, as the mid-term potential for improvement in its French segment was diluted by short-term risks at B&Q.

Cavendish's Mumford said that while Kingfisher's results indicated a slowdown, the market was slightly mixed, as evidenced by paving stone retailer Marshalls' (>> Marshalls plc) positive update that boosted its shares 4 percent.

Gains from gold miners Randgold (>> Randgold Resources) and Fresnillo (>> Fresnillo), up 1.8 to 3.8 percent, capped losses for the index as gold prices edged up, benefiting from a weaker U.S. dollar.

Admiral (>> Admiral Group) stumbled again, down 2.3 percent after Wednesday's sharp results-driven losses.

Meanwhile mid-caps <.FTMC> fell 0.4 percent, weighed by Hikma (>> Hikma Pharmaceuticals).

The drugmaker fell 10.5 percent after cutting its revenue guidance for the year, saying increased competition in its generics business hit prices and volumes for its first half.

(Reporting by Helen Reid; Editing by Mark Heinrich)

By Helen Reid