The Footsie tumbled on falling oil prices, as the UK competition watchdog approved BT's £12.5 billion buyout of mobile phone firm EE.
The go-ahead from the Competition and Markets Authority means the deal brings together the country's largest fixed and mobile telecoms businesses.
However, the FTSE 100 Index slumped by 114.1 points to 5804.1, after China's Shanghai stock index slumped overnight to its lowest level in more than a year on reports that levels of bank credit eased last month in the world's second-largest economy.
Germany DAX and the Cac 40 in France were both down by more than 2%.
The Footsie lost £28 billion this week, following top flight shares losing £85 billion from their values last week, as global markets fell amid a run of poor economic data and interruptions to trading on Chinese markets.
Asian markets first caused shockwaves across world stock markets last summer.
Alastair McCaig, market analyst at IG, said: "Last night's Chinese sell-off has once again seen the Asian powerhouse move back into bear market territory for the second time in just over six months."
The pound was a cent down against the US dollar at 1.43, after official data showed that UK construction unexpectedly fell in November to its biggest annual drop since May 2013.
Construction output fell 0.5% on a monthly basis in November, the Office for National Statistics said on Friday, against expectations for a rise of 0.5%.
Sterling was two cents down against the euro at just over 1.30.
Trustnet Direct market analyst Tony Cross said: "Traders may have attempted to take the glass-half-full approach this morning, but a return to a bear market for Chinese equities, plus the fact crude oil has fallen back below the key 30 US dollar mark has been sufficient to erode any optimism, leaving the FTSE 100 Index nursing another big loss."
In stocks, BT slipped 3.7p to 463.3p, after the telecoms giant was cleared to create a combination that will have 35 million mobile, broadband, and TV customers. EE is currently owned by Deutsche Telekom and Orange.
Brent Crude dipped as much as 5% below 30 US dollars for a barrel of oil, hovering at 12-year lows.
This led Royal Dutch Shell and BP to both fall by almost 3%, or 38.5p, to 1351p and 9.6p to 338.2p respectively.
Credit checking firm Experian slipped 3p to 1129p, after it said its total growth at constant exchange rates lifted 6% in the three months to the end of December.
The biggest risers in the FTSE 100 Index were Randgold Resources, up 158p at 4387p, Shire, up 49p at 4179p, Admiral, up 19p at 1630p, and Next, up 70p at 6740p.
The biggest fallers in the FTSE 100 Index were Anglo American, down 30.2p at 232.8p, Glencore, down 5.1p at 73.5p, BHP Billiton, 42p to 615p, and Hargreaves Lansdown, down 83p at 1220p.
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