By Liisa Tuhkanen and Kit Rees
LONDON (Reuters) - FTSE 100 looked set for its biggest monthly drop since 2008, as fears about Chinese growth hit markets.
The FTSE 100 (FTSE) was down 38.89 points, 0.6 percent lower, at 6,153.14 by 1209 GMT, after a week when it both dropped to multi-year lows and staged its biggest one-day gain in years.
On the last trading day of the month, the index was down 8.1 percent for August, heading for its worst month since the financial crisis. The declines have erased gains made in the first quarter and left the index in a loss for the year.
"February was wrong, as it's clearly been proved, the markets were way too optimistic ... August is wrong, it's way too pessimistic," Michael Browne, fund manager at Martin Currie, said, adding that August was often a weak month for equities.
"We have taken advantage of the opportunities that the markets have presented to us in a negative August... in the expectation that we are going to come back in September."
The FTSE did rise 3.6 percent on Thursday, recouping its losses from its sell-off earlier in the week, as strong U.S. data eased concern about slowing Chinese growth.
"Clearly, we're getting back to normality," said Richard Hunter, Hargreaves Lansdown's head of equities.
Energy stocks led the gainers as oil prices recovered. Oil company BG Group (L:BG) rose 1.9 percent and Royal Dutch Shell (L:RDSa) 1.1 percent.
Mining shares (FTNMX1770) got a brief boost when activist investor Carl Icahn disclosed a stake in diversified miner and energy producer Freeport-McMoRan (N:FCX). But they gave away early gains as copper turned lower.
Among those falling the most was the retailer Next (L:NXT), which dropped 1 percent after Credit Suisse (SIX:CSGN) cut its rating on the shares. Grocer Morrison also fell as Jefferies cut its target price for the shares.
Among mid caps, Debenhams (L:DEB) fell by almost 7 percent after UBS cut its rating, citing survey findings that suggest customer intent to purchase from the company's stores is the lowest among peers.
In small caps, PR and communications firm Huntsworth (L:HNTS) fell 13 percent after posting disappointing results.