THE FTSE 100 failed to catch a break on Thursday, as traders cashed in on Wednesday's gains and jitters over a widespread market panic continued.
London's blue chip index ended the day down 1.5 per cent, falling 108.73 points to 7170.69 - nearly erasing the 1.9 per cent gains made a day earlier that gave momentary hope that a global sell-off was nearing its end.
But stocks continued to be battered across Europe, with the French Cac 40 and German Dax tumbling around two per cent and 2.6 per cent respectively.
US stocks also struggled, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all down more than 1.3 per cent after the market open.
David Madden, a market analyst at CMC Markets UK, said: "Stocks are offside today as traders undo the positive move from yesterday. Investors remain unconvinced that panic has disappeared from the markets.
"The aftermath of a major decline usually leaves traders in limbo as they fear another leg lower is around the corner, and stocks are selling off."
In currency markets, the pound had a roller-coaster Thursday, having shot up after the Bank of England signalled that it could raise rates at a faster pace if the economy develops in line with its forecast.
Sterling was up 0.8 per cent against the US dollar at 1.399, and shot up one per cent versus the euro to 1.143 after minutes from the interest rate decision - which saw the Monetary Policy Committee vote 9-0 to keep rates on hold - were released.
However the pound lost steam later in the afternoon, trading just 0.15 per cent higher on the US dollar at 1.390, and 0.4 per cent on the euro at 1.135.
"Traders are now pricing in a 100 per cent probability of an interest rate rise from the BoE in August, and the UK home builders like Berkeley and Persimmon are feeling the pinch," Mr Madden said.
Berkeley Group Holdings fell 175p to 3,725p, while Persimmon dropped 106p to 2,394p.
Brent crude prices fell 0.9 per cent to $64.76 per barrel as investors continued to worry about oversupply on the back of Wednesday's Energy Information Administration (EIA) release, which showed a higher-than-expected rise in gasoline inventories.
In UK stocks, TalkTalk tanked nearly 10 per cent or 11.7p to 108p after slashing its annual earnings outlook to between £230 million and £245m from £270m to £300m, and said it was tapping investors for £200m to shore up its balance sheet, help drive customer growth and underpin its fibre investment plans.
DFS jumped 7.2p to 199.4p as the recent acquisition of Sofology helped drive a four per cent rise in sales in the 26 weeks to January 27.
AA slumped 8.25p to 125.1p after reporting a near one per cent drop in members for its paid roadside assistance services as well as higher costs after customers were forced to use third-party services during a surge in breakdowns earlier this year.
Bellway tumbled 203p to 3,110p despite the FTSE 250 firm saying it was expecting a 14 per cent rise in half-year housing revenues thanks to strong customer appetite, while Thomas Cook fell 4.9p to 120.4p amid warnings of a competitive and unpredictable market.
The biggest risers on the FTSE 100 were Compass Group up 76.5p at 1,513p, WPP up 39.5p at 1,301p, Just Eat up 16.2p at 803.6p, and J Sainsbury up 4p at 246.2p.
The biggest fallers on the FTSE 100 were Evraz down 18.1p to 336.8p, Ashtead Group down 101p to 1,955p, DCC down 335p at 6,740p and Berkeley Group Holdings down 175p to 3,725p.
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