LONDON'S FTSE 100 Index finished in the red as worries over the spread of a new coronavirus in China sent global stock markets lower.
The top tier fell by more than 1% at one stage after heavy overnight losses in Asia as fears mounted that the virus could become as big as the Sars crisis that also started in China in 2003.
But the FTSE 100 pared back some of its earlier losses to finish 40.7 points lower at 7610.7 - a drop of 0.5% - thanks to a better start to trading in the US.
The Dow Jones Industrial Average on Wall Street was fewer than 20 points lower at the time of close in London.
The Dax in Germany managed to eke out a 0.1% rise by the close, though the Cac 40 in France remained in the red, down 0.5%.
David Madden, market analyst at CMC Markets UK, said: "Comparisons are being drawn with the Sars crisis, which is why dealers are cutting their exposure to equity markets.
"There has been an absence of positive macroeconomic news in the past 48 hours in Europe, so the bears are currently winning out."
In currency news, the pound was boosted by better-than-expected UK jobs figures.
The number of people claiming unemployment benefit dropped by 7,000 to just below 1.31 million in the three months to November, while wages were 3.2% up.
Many economists said the official data lessened the likelihood of an interest rate cut in next week's decision by the Bank of England and could give policymakers room to pause.
Sterling rose 0.3% to 1.30 US dollars and was also 0.3% higher at 1.18 euros.
Low cost airline EasyJet was in sharp focus among UK stocks, rising 5% - up 67p at 1517p - after the demise of rival Thomas Cook helped the business up its revenue guidance.
Chief executive Johan Lundgren said the carrier believes per-seat revenue grew by 1.5% because of the problems Thomas Cook faced, with overall revenue per seat increasing by 8.8% to £58.63 in the three months to December 31.
EasyJet said 22.2 million passengers flew on its planes in the quarter, an increase of 2.8% compared with the same period a year earlier.
But some of its long-haul rivals, such as British Airways owner International Airlines Group, suffered falls on the back of the coronavirus fears, which could impact travel to and from China.
IAG finished the session 3% lower, down 19.4p at 637.8p.
Dixons Carphone shares were also higher after its latest update, despite a mixed set of figures.
The stock surged 7% in the FTSE 250 after it maintained its full year guidance.
It said sales in its electricals division - which includes Currys PC World - were up 2% on a like-for-like basis over the 10 weeks to January 4.
But its Carphone Warehouse arm saw sales fall 9% as the company gets to grips with the changing face of the market.
Dixons shares closed 10p higher at 152.5p.
The biggest FTSE 100 risers were easyJet up 67p at 1517p, Legal & General ahead 5.4p at 307.6p, Melrose Industries 3.8p stronger at 241.7p.
The biggest FTSE 100 fallers were Evraz down 24.2p at 402p, Informa off 30.4p at 827p, Intercontinental Hotels Group 181p weaker at 4965p and International Airlines Group 19.4p lower at 637.8p.
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