Global stock markets plunged deep into the red yesterday as fears over debt-laden countries such as Greece, Portugal and Spain shook stocks for a second session in a row.
The release of key US job figures showing a surprise fall in the rate of unemployment to 9.7% in December did little to ease the selloff.
The FTSE 100 index closed down 1.5%, off 78.4 points at 5,060.9, following a 2% plunge on Thursday.
Banks were among those hit hardest as figures revealed the sector has a near £100billion exposure to the struggling European economies.
Lloyds Banking Group dropped 6%, or 2.94p to 48.32p, while fund management group Schroders fell 34.5p to 929.5p.
Miners were under pressure and fears about economic prospects left Xstrata 52p lower at 950p.
The market’s difficulties also meant British Airways failed to benefit from a better-than-expected third-quarter update. It posted its first operating profits for more than a year and said there were signs cost-saving measures were paying off, but its shares fell 5.3p to 206p.
It was also the second straight day of steep declines, for oil prices. US crude for March delivery slid $1.95 to settle at $71.19 a barrel in New York, while in London, Brent crude shed $2.54 to $69.59.
Alan MacPhee, an investment manager with broker and wealth manager Brewin Dolphin in Aberdeen, noted that, Devro closed up 3.1% at 146.5p, marking a third rise in as many days for the sausage-skin maker. AG Barr also continued its run, adding a further 0.9% to 814.5p.
Among the fallers, Goals Soccer dropped 9% to 133.5p, with Aberdeen-based Faroe Petroleum off 8.2% to 123.5p and STV Group losing 5.9% to close at 46.5p. Dana Petroleum shed 5.1% to £10.05 with Aberdeen Asset Management finishing the day down 3.6% at 117.1p