London’s top flight index beat a retreat as figures revealed the eurozone fell deeper into recession following the worst contraction in Germany’s economy since the financial crisis.

Germany suffered its sharpest fall in output for four years, down 0.6% in the last quarter of 2012 on the back of weaker demand from its trading partners, many of whom are in recession.

The worse-than-expected decline saw the wider eurozone economy shrink by 0.6% in the fourth quarter, sending stock markets sharply lower, with London’s FTSE 100 Index closing down 31.8 points at 6327.4.

Germany’s Dax was among the worst impacted, down 1% and France’s Cac 40 fell 0.5%, while on Wall Street the Dow Jones Industrial Average was trading lower on the news.

The eurozone’s fourth quarter fall marked the first full year in which no quarter saw growth dating back to 1995.

There are hopes Germany has started this year in better form, but there was more bad news from France as figures showed the country did not grow at all during 2012.

The eurozone gloom sent the single currency down sharply against the pound, with sterling up 0.8% at 1.16 euros. But the pound continued its downward trend against the US dollar and was lower at 1.55.

The biggest FTSE 100 risers were Rolls-Royce up 32.5p to 1017p, Aberdeen Asset Management ahead 10.4p to 426.4p, Unilever 38p higher at 2583p and BHP Billiton up 32p to 2225p.

The biggest FTSE 100 fallers were Amec down 82p to 1042p, Shire off 118p to 2027p, Polymetal 40p lower at 1022p and Carnival down 75p to 2500p.