Britain's leading shares clawed back steep morning losses but remained well in negative territory at Thursday's closing after a series of deadly attacks on London's transport system killed at least 33 people and injured scores more.
The FTSE 100 index initially drove down 4 percent as news of the rush hour explosions broke but rallied to close 1.4 percent or 71.3 points down at 5,158.3, still suffering its biggest one day points fall since August last year.
The blasts reminiscent of the March 2004 assault on Madrid were timed to coincide with a summit of Group of Eight leaders in Scotland.
Traders said the news prompted a wave of selling and hit travel, leisure and insurance stocks the hardest, including British Airways, hotelier Hilton and insurer Prudential.
By the close, around 17 billion pounds ($29.7 billion) had been wiped off the FTSE 100's value, a recovery from the 50 billion pounds lost at the day's low point. Market volume swelled to well over 4 billion shares compared with a normal day's turnover of around 2 billion to 3 billion shares.
Market watchers said shares pulled out of their dive as the scale of the attacks became known and a line could be ruled under the potential damage. Buyers who had ridden up the FTSE's 190-point rise during the past seven straight sessions also picked up stock.
"People will try to put this behind them, and maybe the shock will be emotional in the end. It may not be a big economic shock, and that perhaps accounts for the recovery we've seen," said Alex Scott, an analyst at private client money manager Seven Investment Management.
"The market is going to look at this coldly and unemotionally, and investors may be drawing the conclusion that it is a horrific attack, but it's probably not going to change the course of the global economy," said another analyst.
TRAVEL, LEISURE STOCKS HIT:
BA shares slumped more than 8 percent as investors speculated that travellers would drop holiday plans and business travel would dry up but later steadied to be down 4.2 percent.
Airport operator BAA, cruise operator Carnival and hotelier Hilton were all down by 2 to 3 percent.
Insurer Prudential fell 1.9 percent, and Legal & General gave up 1.5 percent.
"The shares are down on the London attacks because of fears people will stay home rather than travel. It's a risk aversion trade that's happening," said a trader.
Dealers said a sanguine mood had emerged after midday.
"Other things like the Madrid bombing and other attacks that have been in major cities over the years actually tend to have a fairly transitory effect on markets and economies. It's brutal to say it, but the effects today are largely non-financial, very distressing though it is," said Robin Woodall, at F&C Asset Management.
Spirits giant Diageo slid 4 percent as news that trading in Europe had worsened overshadowed its expectation that annual underlying operating profits would grow at around 6 percent, in line with its guidance. Brokerage Panmure Gordon downgraded Diageo to "sell" from "hold", saying that as well as tougher conditions in Europe, there had been a slowdown in the United States and Guinness had underperformed.
Mid-cap washroom services company PHS Group was the star midcap performer with an 8 percent rally after it agreed to a 600 million pound take-over approach from a private equity firm.
Anglo-US fund manager Amvescap was one of only two blue chip shares in positive territory, adding 3.3 percent to Wednesday's rally as dealers said it was seen as a take-over target after it rejected an approach from Canadian mutual fund manager CI Financial. CI said it was still interested, and dealers said other firms might also move in.
UK interest rates were left on hold at the latest meeting by policymakers at midday. Economists had expected rates to be left on hold but said rates could be cut next month for the first time in two years.