British blue chips had their worst day since last May on Thursday, as economic and global security fears damaged confidence, with Royal & Sun Alliance and British Airways heading the hit-list.
Britain's second-biggest general insurer, Royal & Sun slumped 15.5 percent to the lowest since early January, after it posted a 38 percent drop in 2003 profits and said it would set aside more money to pay out claims.
British Airways tumbled 11 percent after the carrier said costs in the year to end-March 2005 could rise by between 300 million and 400 million pounds, but it pared losses to 7.9 percent by the close.
The FTSE-100 share index ended down 100.1 points, or 2.2 percent, at 4,445.2 as nervous investors looking at weak US data fretted about the strength and sustainability of the US-led global economic recovery.
Banks, pharmaceuticals, telecoms, oil and mining shares accounted for about two-thirds of the FTSE's losses.
The earlier sell-off in London's benchmark index to a three-week low of 4,429.2 points was sparked by global security fears after a series of explosions on packed Madrid trains shocked markets.
"The record (January) US trade deficit and then Spain really spooked the market," said Hilary Cook, director of investment strategy at Barclays Private Clients. "It's probably a buying opportunity... We think UK stocks offer good value."
That strategists say is because the FTSE, unlike the United States and Germany, is not dominated by technology stocks, which rely on strong economic growth.
Some advise a move to defensives like BT Group, up 0.9 percent, with enough cash to cover its high dividend.
"Perhaps the sector's most unloved company may be starting to attract attention for the right reasons - pragmatic management, visible wins of data contracts, low valuation, high returns," Nomura analysts said.
BT and food manufacturer Associated British Foods - armed with an upgrade by Deutsche Bank to "hold" from "sell" and a higher price target of 630 pence - were two of the few stocks that managed to stay afloat.
Also bucking the trend was mid-cap Laird Group, with gains of 2.6 percent after it reported an 18 percent rise in year profits, said it was seeing an improvement in some of its markets and raised the dividend for the full-year.
Worst-hit mid-caps included Britain's biggest biotechnology firm Celltech with losses of 7.5 percent, and music company EMI Group, which tumbled 7.3 percent.
Technology companies Spirent and Dimension Data both shed about five percent.
Among blue-chips, fund manager Amvescap, often seen as a play on market trends, was down 5.4 percent.
Insurers, weighed by Royal & Sun and also vulnerable to the market's drop, joined the losers. Aviva, Legal & General, Friends Provident and Old Mutual all ceded between four and six percent.
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