The blue-chip London index fell 1.1% and the mid-cap FTSE 250 dropped 0.6%, abandoning gains made on optimism from a pledge by Washington and Beijing to stand by their Phase-1 trade pact.

Oil & gas companies and miners were among the top decliners by the closing bell.

British retailers have cut the most jobs since the depths of the financial crisis and expect the pace of losses to accelerate, the Confederation of British Industry said.

Sterling gained despite the monthly retail sales balance unexpectedly falling to -6 in August from July's 15-month high of +4.

The FTSE 100 is still on course for its best month since April 2018 even as concerns linger about a choppy economic recovery after a record contraction in the second quarter.

Investors are awaiting U.S. Federal Reserve Chair Jerome Powell's address at the Kansas City Fed's annual conference on Thursday for any hints as to the central bank's efforts to revamp its approach to monetary policy.

"The fact the strong start to the trading session couldn't be sustained points to an absence of conviction on traders' part. It feels like many market participants are sitting on their hands ahead of the Jackson Hole Symposium," said David Madden, market analyst at CMC Markets.

AstraZeneca Plc rose 0.1% after launching a trial for an antibody-based treatment for COVID-19.

Aveva Group rose 7.3% as it said it would buy OSIsoft, a privately held maker of industrial software used to manage plants and factories, for an enterprise value of $5 billion.

Retailer DFS Furniture Plc jumped 10.7% after saying its performance over the last six weeks was significantly above its initial expectations.

By Sagarika Jaisinghani and Shreyashi Sanyal