Renewed eurozone fears prompted investors to take recent profits as markets fell sharply into the red on both sides of the Atlantic.
The Dow Jones Industrial Average on Wall Street fell more than 100 points in early trade, sending London’s FTSE 100 Index more than 1% lower, down 66.9 points to 6228.4.
Amid signs of a resurfacing of eurozone political tensions, it has been a tougher week for the top flight after its best January since 1989.
Stocks were hit after European Central Bank president Mario Draghi provided a gloomy outlook for the 17-country economy, while in the UK shares were also impacted after incoming Bank of England governor Mark Carney’s inaugural appearance in front of MPs.
Mr Carney dashed hopes for an immediate easing of monetary policy, talking down the prospect of scrapping inflation targeting.
He said he believed flexible inflation targeting remained the best option and was "far from convinced" over a growth remit.
With little sign that he was planning to significantly extend quantitative easing (QE), the pound strengthened to $1.57 and to 1.17 euros as the single currency was knocked by the eurozone gloom.
The Bank of England also delivered its latest verdict, holding interest rates at 0.5% and QE at £375bn.
The biggest FTSE 100 risers were Compass Group up 14p to 779.5p, Smiths Group 11p ahead at 1225p, TUI Travel 2.7p higher at 306.3p and Vodafone up 1.5p at 171.9p.
The biggest FTSE 100 fallers were Burberry Group down 93p to 1337p, Royal Bank of Scotland down 9.2p to 332.9p, International Airlines Group 5.4p lower at 211.2p and Tullow Oil down 29p at 1178p.
