The internationally focussed FTSE 100 index ended down 0.1% after having gained as much as 0.7% earlier in the session as the dollar earners in the index took a hit from sterling's strong gains.

Retailer Boohoo dropped 15.1% after it warned that freight inflation in its supply chain and higher wages for workers would impact full-year profit margins.

"This is not Boohoo's best look. It is spending heavily on increasing capacity and if sales don't grow to match it, it will have serious implications for profits," said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.

The FTSE 100 has gained nearly 10% so far this year, helped by optimism over economic recovery, robust corporate earnings and dovish central bank policies.

However, a recent rise in inflation due to supply chain constraints and higher oil prices have raised interest rate hike bets, weighing on equity markets globally.

"Initially, it felt like UK's economic recovery was going well and that there was a huge amount of (monetary) control built in, but it now feels like prices are getting out of hand," said Danni Hewson, an analyst at AJ Bell.

Limiting further losses on the FTSE 100 were industrial miners, up 2.0% tracking a jump in iron ore prices, driven by hopes of a recovery in Chinese demand. [IRONORE/]

The domestically focussed mid-cap index shed 0.1%, with travel & leisure stocks leading declines, and recorded its worst monthly performance since March 2020.

Meanwhile, data showed the UK's gross domestic product grew more strongly than previously thought in the second quarter.

AstraZeneca shares climbed 1.4% after its COVID-19 vaccine showed 74% efficacy at preventing symptomatic disease in a U.S. trial.

Whiskey maker Diageo Plc rose 1.3% after it forecast a boost to operating margins on the back of higher spending on premium brands and at restaurants and bars.

(Reporting by Bansari Mayur Kamdar and Amal S; Editing by Saumyadeb Chakrabarty and Ramakrishnan M., William Maclean)

By Shashank Nayar and Bansari Mayur Kamdar