The FTSE 100 fell 3.5pc, with homebuilders such as Berkeley Group, Taylor Wimpey and Persimmon dropping between 7pc and 8pc after the UK government urged people to avoid moving house during the virus outbreak.
Shares in one of Britain's largest housebuilders, Redrow, fell 7pc after the company said it was in talks with six banks to secure additional credit and had applied to take part in the Bank of England's scheme for financing support.
Carnival Corp slumped 11pc to the bottom of the index, with traders pointing to news that the $2-trillion US aid package may exclude cruise liners not registered in the United States.
However, the FTSE 100 is on track for weekly gains not seen since the 2008 financial crisis as central banks and governments ramped up stimulus measures.
The UK government said on Thursday it would pay a taxable grant to self-employed people who have been adversely affected by the pandemic.
New York's Dow Jones Industrial Average closed up 21pc from its Monday low, establishing it in a bull market, according to a widely used definition. The FTSE is up about 14pc since last week's low, but down 27pc since its January peak.
"The last two times we had such a rebound in US markets were during the Great Depression, so it's not exactly helpful here," said Ian Williams, economics & strategy analyst at Peel Hunt. "I think people are playing it with a degree of caution."
The virus is spreading rapidly across the world, with the United States topping the list of countries with the most number of coronavirus cases, surpassing even China, while the total number of deaths in Britain was 578 as of Thursday.
The domestically focused midcap index fell 3.1pc, with doorstep lender Provident Financial sliding 13pc to the bottom after it stopped face-to-face visits in its home credit business in light of a government-ordered lockdown and withdrew 2020 targets.
Aviation services group John Menzies dropped 6.5pc after announcing job cuts and said it was working with the UK government on the possibility of aid under its emergency loan scheme.
Domino's Pizza Group fell 3.1pc after suspending dividend, although the company said extra demand for deliveries was more than making up for a halt in its in-store business.