BAE shares slumped 8%, which came during a tough session for the wider London market, after figures showed a contraction in Chinese manufacturing and some members of the US Federal Reserve fuelled speculation that interest rates may go up sooner than Wall Street had expected.
A late rally after figures showed US manufacturing expanded at the fastest pace in almost four years helped the FTSE 100 Index close in positive territory, up 16.3 points at 6813.
Yesterday's session, and strong gains of around 1% on Monday and Tuesday mean the top flight is now just 117 points below its all-time high.
The prospect of higher interest rates boosted the US dollar after a the greenback had fallen to a four-year low against the pound.
Sterling dipped to 1.66 against the dollar but was marginally higher against the euro at 1.21, after BoE policymaker Martin Weale said that interest rates were likely to rise from 0.5% in the spring next year.
BAE shares led the fallers board in London by some distance - down 36.4p to 400.4p - as it warned that earnings per share could reduce by between 5% and 10% this year.
It is feeling the heat from US defence spending cuts which last year caused pre-tax profits to fall by 65% to £422 million.
The figure was distorted by an accounting write-down based on the value of future US business but when excluding the one-off item BAE's underlying earnings figure of £1.9bn was still short of City hopes.
Other top flight fallers included can maker Rexam, which declined 9.5p to 515p after it reported weaker-than-expected sales for 2013, up 1% to £3.9bn.
The company, which supplies drinks firms including Coca-Cola, said it faced tough trading conditions in parts of Europe as well as higher aluminium costs, although operating profits were still 4% higher at £372m.
Centrica shares were 6.6p higher at 320.6p as the British Gas owner went on the offensive in the wake of a 2% decline in operating profits to £2.7bn for last year.
Chief executive Sam Laidlaw insisted price controls in its residential arm were not a "credible solution".
Meanwhile, investors placed their chips on William Hill after Goldman Sachs said the bookmaker's valuation was starting to look attractive again after recent falls. Shares were 10.4p higher at 356.2p, while FTSE 250 Index rival Ladbrokes dipped 1.7p to 147.9p.
The biggest FTSE 100 risers were William Hill up 10.4p at 356.2p, Vodafone ahead 6.25p to 229.6p, Petrofac up 30p at 1360p and Centrica ahead 6.6p at 320.6p.
The biggest fallers were BAE Systems down 36.4p at 400.4p, Hargreaves Lansdown off 31p at 1321p, Aberdeen Asset Management down 9p at 386p and Anglo American off 35p at 1554p.