The FTSE 100 fell by more than 100 points as global investors continued to act on North Korea-related jitters.
The index was down 1.44% or 108.12 points to close at 7389.94 on Thursday in its worst performance for four months.
The fall comes against a background of increasing tension between North Korea and the US, with the former making a threat to land a missile just short of the US Pacific territory of Guam.
At its worst, the FTSE 100 was down 121 points, or 1.6%, at around 3pm, also pressured by some companies going ex-dividend, and disappointing export and construction data.
Stocks going ex-dividend included BT, Royal Dutch Shell, BP, Lloyds, and pharma companies GSK and AstraZeneca, taking around 41 points off the index.
The ex-dividend date, also known as the reinvestment date, involves the timing of payment of dividends on stocks of corporations, income trusts, and other financial holdings, both publicly and privately held.
If a sale is before this date, the dividend belongs to the new owner; if it is on or after the date, the seller is entitled to the dividend.
If you buy a stock on its ex-dividend date or after, you do not get the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.
Housebuilders Persimmon, Taylor Wimpey and Barratt fell by 2.8 to 3% on weak house price data.
Falls were also seen on Wall Street, with the Dow Jones Industrial Average down 0.5% about 15 minutes into trading and the Nasdaq tumbling by 0.6%.
In European markets, the French CAC 40 was down 0.7% and Frankfurt’s DAX 30 shed 1.2%. The pan-European STOXX 600 hit its lowest level since the end of March, down 1.1%.
Oanda analyst Craig Erlam said: “Risk aversion is once again the name of the game… as geopolitical tensions mount and investors head for cover in the traditional safe havens.
“The war of words taking place between the US and North Korea at the moment, which includes very real threats of action, is taking its toll on investor sentiment.
“The level of risk aversion we’re seeing suggests traders still believe the prospect of military action is very small but precautions are still being taken nonetheless, as this still has the potential to escalate very quickly and unexpectedly.”
Asian markets struggled again, with Japan’s Nikkei feeling the pressure from the rise of the safe-haven yen, which hit an eight-week high. Other safe havens were the Swiss franc and gold.
Hong Kong was down 1.1%. Shanghai and Seoul were also down.
Markets had earlier stabilised as US secretary of state Rex Tillerson tried to ease the tensions, saying he did not believe there is “any imminent threat” to Guam and that diplomacy would prevail.
On the currency markets, the pound was down to a three-week low against the US dollar but mainly due to earlier disappointing output and trade data.
The data included falling car production and a slide in construction, which follow a general slowdown in the first half of the year.
Neil Mellor, a currency strategist with Bank of New York Mellon in London, said the pound was “drifting towards the lows from last month against the dollar”.
“The frame of mind is ‘we don’t like sterling and we will need a significant upturn in the data to change that’.”
Source: Sky