London's top-flight share index tumbled by more than one per cent as gains inspired by a Wall Street rally last week evaporated and airline stocks were pummelled by a profits warning from Air France-KLM.

The FTSE 100 Index was down 85.1 points to 6738.4, with the performance also likely to have been dragged down by official figures showing a shock fall in manufacturing output.

Markets in Europe were in the red too, with Germany's Dax and France's Cac 40 each off by more than one per cent.

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On Wall Street, the Dow Jones Industrial Average tumbled below the 17,000 mark - which it had surpassed amid optimism following a much better-than-expected US jobs report last week.

In currency markets, the pound came under pressure during the session after the weak manufacturing data - showing a 1.3 per cent slump in May - dampened expectations for an interest rate hike.

It was the biggest fall for the sector since January last year and ended a six-month run of growth.

But sterling later recovered ground to be almost flat at just over 1.71 US dollars and just below 1.26 euros.

In equities, International Airlines Group (IAG), owner of British Airways and Iberia, was the biggest faller, after Air France-KLM cut its profits guidance by 12 per cent against previous forecasts.

It highlighted the impact on fares caused by overcapacity on some routes, particularly North America, and came in the wake of a warning from Lufthansa last month.

IAG shares fell seven per cent, or 25.3p, to 335.9p and low-cost rival easyJet was off by nearly six per cent, or 77p, to 1248p.

Thomson and First Choice operator TUI Travel was also hit, dropping 9.1p to 380.2p, while FTSE 250 rival Thomas Cook dropped 7.4p to 126.9p.

Meanwhile an increased takeover proposal for Shire from US firm AbbVie failed to drive up the price of the Hampshire-based pharmaceuticals firm.

Despite the new £30 billion price tag, an 11 per cent increase on a previous offer at the end of May, shares fell 121p to 4530p.

Marks & Spencer shares had a turbulent time after its latest trading update, initially swinging into positive territory after the figures met subdued City expectations.

Shares opened one per cent higher as chief executive Marc Bolland said he was confident the firm was getting to grips with the recent website issues which have blighted the first quarter performance. But the stock closed more than one per cent, or 5.8p, lower at 427.4p.

The biggest risers on the FTSE 100 Index were Coca-Cola, HBC, up 11p to 1330p, Aggreko up 9p to 1694p, Glencore up 1.6p to 344.1p and Friends Life up 0.8p to 320.6p.

The biggest fallers included International Airlines Group down 25.3p to 335.9p, easyJet down 77p.