Heavy selling hit European markets after a grim update from the US economy added to worries over the continuing conflict in Iraq.
The FTSE 100 Index declined 53.5 points to 6733.6 while there were similar declines of around one per cent in Paris and Frankfurt as investors weighed up the geo- political uncertainty.
The risk averse strategy of investors in London was seen in mining stocks as Anglo American dropped two per cent or 29.5p to 1427.5p and Antofagsta eased 16.5p to 762.5p.
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The pound fell against the dollar, at below 1.70, even though it emerged the US economy shrank at an annualised rate of 2.9 per cent in the first three months of the year in its worst showing for the period in five years. Economists said the bigger-than-expected revision made it unlikely that the US Federal Reserve will raise interest rates any time soon.
Sterling also fell against the euro, to 1.25.
Pharmaceuticals firm Shire was the leading riser after US firm AbbVie insisted its recent £27.3 billion takeover approach for the hyperactivity drug specialist represented "compelling immediate value".
It has not increased its offer for Shire but the renewed interest meant shares in the Basingstoke-based company still topped the top flight leaderboard, rising more than two per cent or 113p to 4517p.
On the fallers board, aerospace engineering firm Meggitt dropped more than three per cent after it was the subject of a ratings downgrade by JPMorgan Cazenove.
The broker said it believes there has been little sign of a recovery since the company's warning at the end of last year that it would miss its 2013 targets due to weaker growth in the civil aerospace after market.
Shares in the Dorset-based company fell 17p to 508.5p.
TSB shares were four per cent lower on its first day of official trading following the sale of a 35 per cent holding by Lloyds Banking Group on Friday.
The stock listed at 260p and rose as high as 300p in conditional dealings prior to the weekend but was 12p lower at 285p yesterday after HSBC issued a downbeat note and placed a target price of 270p.
The broker said the new player faced some tough challenges, not least from a disproportionate share of low-margin mortgages and a branch network that was over dependent on Scotland.
Meanwhile, shares in bus and rail operator Stagecoach were flat at 377.7p after it reported annual results in line with expectations.
The biggest risers on the FTSE 100 were Shire up 113p at 4517p, Ashtead up 14.5p at 841.5p, TUI Travel up 5.2p at 388.3p and Rolls-Royce up 13p at 1045p.
The biggest fallers were Meggitt down 17p at 508.5p, Tullow Oil down 24.5p at 846.5p, Coca-Cola down 36p at 1332p and Arm Holdings down 22p at 886p.