With around an hour and a half of trading to go, the FTSE 100 Index was 9.8 points, or 0.1 per cent lower at 6,600.1, well below the opening peak of 6,651.96.
But it held off the session low of 6,87,87 hit after the Greek government's candidate for president came up 12 seats short of the 180 needed for victory in a final parliamentary ballot.
That failure to elect a new president forced Greek prime minister Antonis Samaras to announce that the country will hold early national elections, probably on January 25, and sent the Athens stock market over 10 per cent lower although it recovered to nurse losses of 4 per cent.
Connor Campbell, financial analyst at Spreadex said: ‘Whilst a democratic election should be nothing to fear for a Western country, economists are concerned it could lead to a victory for the left-wing Syriza part, and put Greece’s international bailout in jeopardy. ‘
Other euro zone markets were also under pressure, with Germany’s Dax 30 index down 0.8 per cent, while France’s CAC 40 index fell 0.6 per cent on worries about the implications for the struggling region.
Campbell said: ‘Greece is emblematic of Eurozone economic disaster, and has gained extra prominence in the eyes of the European economic elite due to its recent volatility; the ECB will be watching carefully for any new waves stemming from Athens.’
In early deals on Wall Street, the blue chip Dow Jones Industrials Average was down 7.5 points at 18,046.3, off opening lows but still snapping a seven-day winning streak which took it above the 18,000 level for the first time ever.
The broader S&P 500 index fell 0.5 points to 2,088.3 also retreating modestly from last week’s record highs which had been fueled by better than expected US growth numbers, with no important economic or corporate news released today.
12.15: The Footsie managed to bob back into positive territory at lunchtime supported by strength in commodity stocks as oil prices bounced higher although the prospect of a snap general election in Greece put European markets under pressure.
The Athens stock exchange was sharply lower after politicians failed to elect a new president, forcing prime minister Antonis Samaras to announce that the country is likely to hold early national elections on January 25.
By mid session, the FTSE 100 Index was 11.9 points higher, or up 0.2 per cent at 6,621.8 although at one stage it had been lower after the Greek government's candidate for the presidential post came up 12 seats short of the 180 needed for victory.
In Europe, the Dax 30 index in Frankfurt was 0.7 per cent lower, while the CAC 40 index in Paris shed 0.4 per cent on worries about the implications for the struggling euro zone economy of fears that Greece’s bail-out programme could be under threat.
Traders are worried that a snap election in Greece could lead to the ascendancy of a left-wing party that wants to cut what the country owes in bail-out money, derailing its progress away from a crisis which has raged since 2010.
Craig Erlam, market analyst at Alpari (UK) said: ‘The result is a real kick in the teeth for the Samaras led coalition, which has made some real progress since coming to power.]
'There was talk of the country exiting the bailout in the coming months as a result of the progress that had been made but this is extremely unlikely now.’
He added: ‘The result, while not really unexpected, has spooked the markets, although not as much as it would have at the height of the eurozone crisis.’
On currency markets, the pound remained flat against the US dollar and euro with the main focus on the Russian rouble which was down by as much as 7 per cent at one stage, wiping out some of its recent gains after a report pointed to the first signs of recession since 2009.
The FTSE 100 Index was still higher for an eighth session in a row due to the impact of stronger commodity stocks. BHP Billiton added 44.5p to 1,413.5p and Anglo American gained 30p to 1,212p, while a modest recovery in the price of Brent crude oil to around $60 a barrel saw BP add 0.9p at 417.8p.
Among the blue chip fallers, shares in recent newcomer Indivior fell by more than 3 per cent as some of the euphoria over the pharmaceutical company's recent creation via a demerger from Reckitt Benckiser started to fade.
The company rose by more than 20 per cent on its first day of trading but has fallen back since then and was down by another 4.95p to 140.1p today.
Royal Mail set the pace among the UK blue chips in the first session of trading since the collapse of parcels competitor City Link. Shares were nearly 5 per cent higher, up 19.5p to 442.5p.
Turnaround specialist Better Capital, which owned the delivery company, was 0.5p lower at 88.25p. It has lost 42 per cent of its value in 2014.
Blue chip clothing retailer Next was lower ahead of a trading statement due tomorrow, the first of the post-Christmas updates from the high street. Next shares dropped 50p to 6,510p.
And among the mid caps, online fashion firm ASOS shed 33p to 2,550p after reports it was unable to handle online orders for several hours on Sunday - one of the busiest post-Christmas trading days – due to technical problems.
09.30: The Footsie slipped back as the morning session progressed, giving up earlier gains made thanks to strength in heavyweight commodity stocks as the oil price rose to track weaker European markets on Greek presidential vote uncertainties.
Approaching mid morning, the FTSE 100 index was down 4.3 points at 6,625.6, reversing after having been higher for an eighth session in a row albeit amid thin trading volumes.
European markets were lower, with Germany’s Dax 30 index down 1.1 percent and France’s CAC 40 index off 0.7 per cent on worries over the impact of the key Greek vote tonight for the euro zone.
Greece faces a final ballot today that will decide whether the country's leading coalition can gather enough votes to elect a president.
If it fails, markets are concerned this may trigger a snap election that could bring the left-wing opposition Syriza party to power and derail an international bailout and put further pressure on the fragile euro zone economy and European Central Bank boss Mario Draghi.
Tony Cross, market analyst at Trustnet Direct said that ‘with the next few days light on data and short on corporate news the only thing that appears likely to cause a slip in momentum is Greece.
‘Investors are nervousness before a vote in the Greek parliament that could result in snap elections. That would leave the market pondering the risk of the left-wing Syriza party, which is against fiscal reconstruction, coming to power - raising the risk of further destabilisation in the euro zone.’
On currency markets, the pound was flat against the US dollar and euro but Russia's rouble was down by as much as 7 per cent at one stage today, wiping out some of its recent gains as a report pointed to the first signs of recession in the country since 2009.
A strong session for Asian markets overnight and a modest recovery in the price of Brent crude oil to almost $60 a barrel ensured the likes of BHP Billiton, Rio Tinto and BP remained in positive territory.
But among the blue chip fallers, recent newcomer Indivior fell by more than 3 per cent as some of the euphoria over the pharmaceutical company's recent creation through a demerger from Reckitt Benckiser started to fade.
The company’s stock rose by more than 20 per cent on its first day of trading last week but has fallen back since then and was down by another 4.45p to 140.5p today.
Other top flight fallers included BT Group, which was down by 6.9p to 409.8p, and Burberry with a drop of 22p to 1,633p.
08.30: The Footsie opened higher on the first session back after the Christmas break, tracking gains by Asian stocks following pre-weekend strength on Wall Street, although the rally looked fragile with a number of underlying concerns remaining ahead of this week’s New Year break.
In early deals, the FTSE 100 index was up 16.4 points at 6,6269.4, although there was a swift drop back from an opening high of 6,651.96.
The UK blue chip index closed 11.75 points higher on Christmas Eve having seen a late Santa rally thanks to a push up to record highs on Wall Street, with the Dow Jones breaching the 18.000 level for the first time after bumper US growth figures.
US blue chips extended those new peaks when they returned after their Christmas break on Friday and Asian stocks followed them higher today although there were signs of some nervousness ahead of a key vote in the Greek parliament that could result in snap elections.
Greece faces a final ballot today that will decide whether the country's leading coalition can gather enough votes to elect a president.
If it fails, markets are concerned this may trigger a snap election that could bring the leftwing opposition Syriza party to power and derail an international bailout and put further pressure on the fragile euro zone economy and European Central Bank boss Mario Draghi.
Former European Commissioner Stavros Dimas, the candidate for the leading coalition, needs to garner 180 votes in parliament to become Greek president but has failed to do so in two previous votes.
Naeem Aslam, chief market analyst at Avatrade said: ‘Perhaps, the biggest worry among all of them is the spill over effect of the Greek election and as a result of this anti austerity parties could gain more fuel in other countries like Italy and Spain. This will represent higher instability for the euro region and more challenging problems for Mr Draghi.’
But a rally in the price of oil helped relieve some of the pressures, with Brent crude heading back towards $60 a barrel on renewed tensions in Libya.
A fire caused by fighting at one of Libya's main export terminals has destroyed more than two days of the country's oil production, officials said on Sunday, as clashes escalated between factions battling for control of the Opec member nation.
Aslam said ‘we have a plenty of oil on the market, nearly extra 2 million barrels of oil, but a small situation like this have brought a relief rally for oil which has been under tremendous pressure recently.’
