The blue-chip FTSE 100 and the mid-cap FTSE 250 shed 0.5% and 0.3%, respectively, with major banks falling on the prospect of negative lending rates. But the resulting weakness in the pound looked to benefit the export-heavy index in the near-term.
Healthcare stocks supported the FTSE 100 slightly, with Astrazeneca adding 1.2% after it entered into an agreement with Dogma Therapeutics.
Tech-focussed investment firms were biggest drags on the FTSE 250 following another sell-off in U.S. technology stocks. [.N]
The Bank of England said it was considering negative interest rates as Britain's economy faces a triple whammy of rising COVID-19 cases, higher unemployment and a possible new Brexit shock. It also kept its main stimulus programs on hold, citing a faster-than-expected economic recovery from pandemic lows.
"Given already high expectations of further easing, the debate about which tool the Monetary Policy Committee might use has also gathered a lot of attention," ING analysts wrote in a note.
"We remain confident that an increase in the asset purchase facility is more likely in the near-term."
A raft of global stimulus has powered equity markets since a coronavirus-driven crash in March, but gains have slowed recently against the backdrop of a wobbly economic rebound and, in Europe, growing fears of a no-deal Brexit.
Next rose 4.1% after the clothing retailer raised its profit outlook for the second time in two months.
"That is not to say that the outlook for the second half isn't going to be a challenging one, but it's good to know that there are some retail stocks that are dealing with the various challenges head on," said Michael Hewson, market analyst at CMC Markets UK.
Online trading platform IG Group topped the FTSE 250 after reporting a surge in first-quarter revenue.
(Reporting by Shashank Nayar in Bengaluru; editing by Uttaresh.V and Shailesh Kuber)
By Shashank Nayar and Ambar Warrick