Anglo-Dutch steelmaker Corus was the heaviest FTSE loser, down 2.4 percent, adding to Thursday's 1.4 percent fall on concerns that falling demand in China could lead to a steel glut.
The stock market closed early at 1230 GMT ahead of the New Year celebrations, with the FTSE 100 finishing 5.8 points down at 4,814.3, breaking a string of gains which have lifted it by 2.5 percent since mid-December. On Thursday the index touched a 2-1/2 year high of 4,826.
Volume at 670 million shares was below a normal day's business of well over 2 billion shares. The market reopens on January 4.
Andrew Bell, European Strategist at Carr Sheppards Crosthwaite, said the optimism in December - based largely on lower oil prices and a sense that economic growth next year would be solid - had been overtaken by year-end torpor.
"Nobody's really been doing anything, we'll only really get a clear sense of where sentiment and the money is in the second week of the New Year," said Bell, adding he guessed that early 2005 could bring a little further upward momentum.
"The sense is that business surveys have bounced a bit, consumer confidence seems to be hanging in and on the back of that I suspect that we can look forward to a reasonably positive US fourth quarter earnings season," he said.
LAST MINUTE FLURRY: The FTSE dipped to the day's low and then rallied in the last hour or so of business, with dealers reporting funds making last minute adjustments to portfolios for the year-end. Some of the early losses followed a weaker close on Wall Street after US economic data gave a mixed picture of the world's biggest economy.
Oils and banks took the brunt of the selling, with oil majors BP and Shell down around 0.5 percent, while heavily-weighted banking giant HSBC fell 0.7 percent.
Some of the retailers brightened, rallying after recent concerns about the strength of consumer spending over the Christmas period, with electricals chain Dixons up 1 percent and clothing retailer Next 0.2 percent higher. News on Thursday that unlisted department store group John Lewis saw an 11 percent rise in the first three days of its post-Christmas clearance supported sentiment.
House-building shares were generally steady, but traders said concerns over UK government intentions to raise planning application fees by an average 39 percent had caused an early dip. In the sector Bovis Homes lost 1.5 percent.
Other midcaps saw power-equipment supplier Aggreko, which operates in Sri Lanka and Indonesia, rise 1.1 percent, adding to Thursday's 6.6 percent gain on speculation of demand for its portable generator equipment arising from the Asian tsunami disasters.