The FTSE 100 took its second day of sizeable losses on Friday, after US jobs data sparked a global stock market sell-off on fears of an impending American recession.
The blue chip index fell 109 points to end the day on 8,175, a 1.3% fall.
US non-farm payrolls grew 114,000 in July, down from 179,000 last month and well below the 175,000 analysts had expected.
The unemployment rate rose to 4.3%, up from 4.1%, and its highest level in nearly three years.
Chris Beauchamp, chief market analyst at online trading platform IG, said: “In the space of barely two days markets have gone from looking forward to a Fed rate cut in a growing economy to fretting about an impending recession.
“Today’s huge payrolls miss and the surge in the US unemployment rate has sparked a fresh flight from risk assets already reeling from some poor earnings reports and concerns about a wider conflict in the Middle East.
“Investors are now hoping for a 50bps rate cut in September, but worry that even this will be too little, too late to stave off a US recession.”
France’s CAC 40 fell 1.6%, while Germany’s Dax fell 2.3%.
Stateside, the S&P 500 was down 1.9% as markets were closing in London, while the Dow Jones was also down 1.9%.
The pound was up 0.6% at 1.28 US dollars and was down 0.6% at 1.173 euros.
In company news, British Airways owner International Consolidated Airlines Group (IAG) saw shares lift after it scrapped a deal to buy Spanish carrier Air Europa.
IAG shares rose 4.3% on Friday after it confirmed the termination, posted its half-year results and dished out a dividend late the previous evening.
The airline group, which also owns Iberia and Aer Lingus, said it has given up on efforts to buy Air Europa after EU regulators raised competition concerns over the deal.
Capita shares fell 10% after it forecast a fall in annual revenues and said it was pressing ahead with a “rapid” cost-cutting plan announced late last year, with cuts to around 900 jobs.
On Friday, the firm told investors it has taken action to cut around £100 million as part of a £160 million cost-saving target by June 2025.
The price of a barrel of Brent crude oil was down 3% to 76.12 US dollars as markets were closing in London.
The biggest risers on the FTSE 100 were IAG, up 7.45p to 167.45p, Haleon, up 9.8p to 367.8p, United Utilities, up 26p to 1059p, Severn Trent, up 64p to 2653p, and GSK, up 36.5p to 1562.5p.
The biggest fallers on the FTSE 100 were Intermediate Capital, down 152p to 1980p, Diploma, down 306p to 4074p, JD Sports, down 8.7p to 123.75p, Melrose Industries, down 32.4p to 482.6p, and Barclays, down 13.8p to 209.1p.