The FTSE 100 performed better than expected on Monday morning, falling by 0.46% after Chancellor George Osborne moved to reassure markets before the open.
London's premier index dropped 24.75 points to 6,114, a vast improvement on the collapse on Friday following Britain's decision to leave the European Union.
Banks continued to be hammered, with Barclays down 6.7%, RBS falling 5.1% and Lloyds slumping 4.4%.
The pound, which continued its negative slide overnight, staged a mini rally after Mr Osborne said the UK economy is "about as strong as it could be to confront the challenge our country now faces", adding Britain remains "open for business".
However, it was still down 1.70% at 1.345 US dollars.
Shares in housebuilders also took a dive, with both Taylor Wimpey and Persimmon slumping. Foxtons, which issued a Brexit profit warning, plunged 17%.
EasyJet also fell, by 14%, following a statement saying it will take a £28 million hit following two months of turbulence, adding that Brexit would have a negative impact on the airline.
Tony Cross, market analyst at Trustnet Direct, said: "That profit warning from Foxtons is doing the wider sector no favours. The biggest faller in early trade however is easyJet, with a profit warning having been issued by the airline, highlighting the damaging effects of a plummeting pound and the accompanying economic uncertainty.
"There's still an awful lot of questions that need to be answered as to what happens next and until we see some clarity here, the volatility is likely to continue."