The FTSE 100 was hovering near record highs on Wednesday, but was weighed down by retail stocks after Next warned sales and profits would be under pressure in the year ahead.
London's top flight index was nearly flat at around 7,175 points in early trading, near Tuesday's all-time closing high of 7,177.89 but still below the mid-session record of 7,205.45.
Retail stocks were some of the worst performers on the index.
Next shares trimmed losses after falling 14pc at the start of the session, but were still holding the bottom spot on the FTSE 100, trading lower by around 9.75pc.
The high street giant said it was bracing for "tougher times" ahead, with profits expected to drop by 3.6% in the year to January 2017 after sales in the 54 days to December 24 fell 0.4pc, and end-of-season clearance sales plunged 7%.
Next said trading woes are set to deepen over the following 12 months, with profits tumbling as much as 14pc in the worst case scenario in the year to January 2018.
Neil Wilson, a senior market analyst at ETX Capital said: "Marks & Spencer and Debenhams have both tumbled 5% this morning as the fallout from Next's Christmas trading statement is chewed over by investors.
"Both of these face similar problems to Next - cost pressures and a failure to stay fresh in the eyes of consumers. Investors are clearly wary about high street dinosaurs as we head into an uncertain 2017, with Brexit, inflation and a weak pound all a major concern."
Shares in AB Foods, which owns Primark, also fell 3.6pc.
In currency markets, the pound was up 0.3pc against the US dollar at around 1.227 and flat against the euro at 1.175.
Sterling was little affected by the Markit/CIPS UK construction purchasing managers' index (PMI) which came in at a better-than-expected 54.2 for December, up from 52.8 in November. Economists had been expecting a reading of 52.6.
A reading above 50 indicates growth.
It marked the fastest pace of construction output in 10 months, having been driven by improved order books and a rebound in business conditions.
Across Europe, the French Cac 40 was relatively flat and the German Dax was down nearly 0.2pc.
In oil markets, Brent crude prices were up 0.3pc at around 55.69 US dollars per barrel (£45.39), as investors cheered reports that Saudi Arabia was set to increase oil prices in February as part of a deal between major producers to tackle the supply glut.
Away from London's top tier index, B&M shares rose 6.7pc after the discount retailer reported a 7.2pc jump in like-for-like sales in the three months to December, with revenue rising over 20pc to £789.1 million.
The company put the performance down to strong festive sales and "improved in-store standards" for customers.