The FTSE 100 tumbled after cautious traders suffered a “hangover” following a bullish start to the week.
On Thursday, Europe’s largest markets lost most of the significant gains they had racked up on Wednesday, after positive news about an antiviral drug from US firm Gilead stirred optimism.
Cautious statements from economists and the central banks took the steam out of the markets.
As a result, the FTSE 100 closed 214.04 points lower at 5,901.21p at the end of trading on Thursday.
Neil Wilson, chief market analyst at Markets.com, said: “Yesterday’s risk party has left participants with a bit of a hangover.
“Assets have taken a bit of a beating today amid a slew of pretty rotten economic data and an European Central Bank (ECB) presser that maybe wasn’t all that.”
The ECB held rates, in line with forecasts, as it warned that the currency region could contract by between 5% and 12% this year, depending on how the crisis plays out.
David Madden, market analyst at CMC Markets UK, said: “The ECB is trying its best to keep money flowing around the euro-area, but in the end, the schemes are putting more pressure on Eurozone banks.”
The German Dax decreased by 2.22%, while the French Cac moved 2.12% lower.
Across the Atlantic, the Dow Jones sank on the opening bell after the latest US jobless claims reading of 3.83 million, taking the level to above 30 million since the pandemic took hold.
Meanwhile, sterling held firm against the weakening US dollar.
The value of the pound rose 0.91% versus the US dollar at 1.258 and was up 0.44% against the euro at 1.151.
The price of oil surged as traders were a little less fearful about oversupply in light of the inventory reports from the US on Wednesday.
The price of a barrel of Brent crude oil increased 13.3% to 25.74 US dollars.
Mr Wilson added that the FTSE “notably underperformed” as a result of poor trading from the UK-listed oil majors.
While prices jumped, Royal Dutch Shell sank towards the bottom of the FTSE after it slashed its dividend for the first time since the end of the Second World War.
Shares in the company dropped by 160.8p to 1,325p. Rival BP also sank, sliding by 20.4p to 313.1p.
Elsewhere in company news, Lloyds Banking Group fell after it revealed a massive drop in profit after taking a major hit from worsening economic conditions in the first three months of the year.
It closed 2.52p lower at 32.24p at the end of trading on Thursday.
Supermarket giant Sainsbury’s dipped after it warned over a coronavirus hit to profits of more than £500 million despite surging grocery sales.
Shares were 9.3p lower at 198.1p after it also said social distancing in stores is likely to remain throughout 2020.
Dettol manufacturer RB was one of only six risers on the FTSE 100, after it said that surging demand from shoppers worried about coronavirus triggered a 12% rise in sales.
The biggest risers on the FTSE 100 were RB, up 228p at 6,630, Flutter, up 306p at 9,750p, Sage, up 13.4p at 640p, and Hikma, up 39p at 2,370p.
The biggest fallers of the day were Hargreaves Lansdown, down 208.5p at 1,440.5p, Royal Dutch Shell, down 165p at 1,286.4p, Intercontinental Hotel Group, down 160.8p at 1,325p, and Informa, down 359p at 3,608p.