Britain's top shares closed at a six-week low on Thursday hit by disappointing numbers from index giant AstraZeneca and by large fund-related sell programmes, dealers said.
Telecom shares skidded after Cable & Wireless reported a five percent drop in third-quarter revenue, sending its shares down three percent. Vodafone and smaller rival mmO2 also lost 2.7 percent each.
The blue-chip FTSE-100 index ended down 56.6 points, or 1.3 percent, at 4,411.5, its worst close since mid-December.
"People are sticking their heads in the sand. Interest rate worries are also causing jitters, but it's quite healthy for the market to correct assuming investors don't get frightened off," said one senior UK equity trader.
Dealers said pressure from large sell programmes was still reverberating through the market and the volume of such trades was likely to increase, emulating US trading volume traffic.
Dealers speculated that British bank Abbey National was behind a large multibillion dollar transition trade.
Last week Britain's second-biggest mortgage lender said it had hired State Street Global Advisors as one of the managers to help run some of the bank's more than 550 funds as Abbey is getting out of businesses where it does not have the expertise or size needed.
But dealers said that interest rate moves in the United States and the UK would continue to dominate the agenda.
Wall Street tumbled on Wednesday after the Federal Reserve indicated it might be closer to an interest rate hike.
"The markets have overreacted. The Fed is trying to do things gradually and prepare the ground for a rate rise," said Dan Bunting, analyst at Dryden Wealth Management Ltd.
UK rates are widely expected to rise in February.
Europe's second-biggest drug-maker AstraZeneca fell on concerns about its Crestor cholesterol drug. Although it met forecasts for 2003 and predicted a pick-up this year, sales of Crestor fell short of forecasts and the firm said wholesalers still held some excess inventories. The stock lost 2.7 percent.
Shares in Carnival Corp, the world's biggest cruise operator, climbed 2.7 percent after rival US-Norwegian cruise line Royal Caribbean Cruises said it had recently broken booking records and prices were rising.
Shares in Compass, the world's biggest catering firm, rose 2.4 percent after smaller French rival Elior reported a rise in first-quarter sales and reaffirmed its outlook for the year.
However, the recent rally in technology shares fizzled out as investors booked profits as the tech-laden Nasdaq slid for the second day in a row. UK stocks Sage and Dimension Data shed 4.2 and 9.4 percent respectively.
Shares in Reuters Group Plc, the world's largest listed provider of news and data to financial markets, fell four percent, the second-biggest loser among a weaker European media sector, after the stock hit an 18-month high on Wednesday.
Among mid-cap players, electronics manufacturer Alba soared 14 percent after it teamed up with Turkish appliance exporter Beko to buy the television manufacturing business of insolvent German firm Grundig.