European markets fell sharply yesterday as traders caught up with Friday's sharp tech-driven sell-off on Wall Street.

Blue-chip shares in London were also weighed down by a note of caution surrounding the recent boom in house building stocks.

The FTSE 100 Index closed 72.7 points, or more than 1%, down at 6622.8, while Germany's Dax and France's Cac 40 also suffered hefty falls.

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It came after New York's Nasdaq suffered its biggest one-day drop since February as investors dumped tech and biotech shares on Friday.

Wall Street started the week where it had left off and was again well into the red by the time of the close in the City.

On currency markets, sterling was flat at 1.66 US dollars and 1.21 euros.

In London, tech stocks on the slide included FTSE 100 group ARM Holdings, down 2%, or 23.5p to 972.5p, while on the FTSE 250 online delivery firm Ocado led the fallers board with a slump of nearly 7%, or 30.2p, to 422p.

Elsewhere web fashion retailer ASOS lost 7%, or 343p, to reach 4617p while recently-floated rival lost 5%, or 3p, to 52p. Internet takeaway service Just Eat fell 9%, or 26.8p, to 264p.

House builder Barratt Developments led the top-flight fallers, off 5%, or 20.5p, to 389.4p, after a downgrade from Goldman Sachs following a strong period of outperformance.

Stocks across the sector were down amid speculation that lenders are planning to rein in mortgage approvals due to fears of a housing bubble.

Persimmon dipped 54p to 1292p while in the FTSE 250, Taylor Wimpey was off 4.4p at 113.6p, with internet property search firm Rightmove down 78p to 2477p and estate agency group Countrywide off 17p to 636p.

Consolidation in the cement market caused by the mega-merger of Lafarge and Holcim also made investors nervy.

The 'merger of equals' will create a company with combined sales of around £26 billion but competition concerns mean they will have to offload assets accounting for up to 15% of their joint earnings. This could result in some opportunities for Dublin-based building supplies firm CRH, which initially made gains but by the close of trading had succumbed to the wider gloom, down 15p to 1760p.

The global sell-off meant investors switched out of riskier stocks in favour of companies with the appeal of steady dividend pay-outs, meaning gains for just a handful of top-flight companies.

Supermarket Morrisons kept its head above water following recent heavy losses, up 0.1p to 204.9p.

The biggest FTSE 100 risers were Centrica, up 6.3p to 334.8p, BG up 5.5p to 1141.5p, SSE up 7p to 1482p and Babcock International up 4p to 1418p.

Hargreaves Lansdown were down 71p to 1365p, with GKN down 16.4p to 389.7p.