THE London market capped off its fifth consecutive week of falls as it was driven lower by US plans to scale back economy-boosting measures.
Despite early gains, the FTSE- 100 index closed down 43.34 points at 6116.17, having fallen almost 3% on Thursday – its biggest one-day drop since September 2011.
Bourses across Europe also posted another day of losses, with the Cac 40 in France falling 0.7% and Germany's Dax plunging 1.8%.
The Dow Jones industrial average on Wall Street was in negative territory after closing deep in the red on Thursday. The global stock market sell-off followed US Federal Reserve chairman Ben Bernanke saying its quantitative easing programme would be tapered this year and end next year as long as the economy keeps improving.
Jitters over an end to money printing by the world's biggest economy have sent markets sharply lower in recent weeks –bursting a stimulus-induced equity bubble. Just a month ago, the Footsie had soared to more than 6800 points, nearing a high seen during the dotcom boom in 1999, while the Dow Jones raced to record levels.
Max Cohen, financial sales trader at Spreadex, said: "Markets are still trying to get to grips with the news that the Federal Reserve plans on scaling back its monthly bond purchases. owever, crucial data including unemployment and inflation rates, will still play a key part in determining the pace of the withdrawal."
The flight from equities has seen investors flood into the US dollar, with the pound losing ground against the greenback yesterday to $1.54, but treading water against the euro at €1.17.
Among UK stocks, banks continued to struggle after the Bank of England's revelation that five lenders have been told to raise another £13.4 billion to plug a bigger-than-expected £27.1bn hole in their finances. Lloyds Banking Group shed 0.23p to 61p, HSBC dipped 2.9p to 661.6p and Barclays fell 6.5p to 281.6p
Royal Bank of Scotland, which has the biggest capital shortfall by far, was the biggest top tier faller amid uncertainty over its future following Government plans to consider the option of splitting it into a "good" bank and "bad" bank.
Shares in the taxpayer-backed lender have fallen heavily since boss Stephen Hester announced he was quitting. They dropped another 22p to 281.7p, a 7.2% fall.
Outside the top tier, airline Flybe edged up 0.25p to 41.5p despite it reporting annual losses widening to £23.2 million as analysts forecast improvements thanks to cost-cutting action.
The biggest risers on the Footsie were Bunzl, up 26p to 1259p, Antofagasta, 14p higher to 838.5p, and TUI Travel, up 5.1p to 345.5p.
The biggest fallers were Fresnillo, off 49.5p to 911p, Burberry, 47p lower to 1290p, and Arm Holdings, 26.5p lower to 772.5p.
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