Investors took flight after Greece’s new government dubbed the country’s bailout package as a “toxic fantasy” and renewed its pledge to seek a debt restructuring.
Figures from China added to the gloomy mood, with data showing imports and exports declined last month, adding to fears of continued weak demand in the world’s second-largest economy.
Jasper Lawler, analyst at CMC Markets UK, said: “A slump in Chinese imports and rising uncertainty surrounding the part Greece will play in the future of the eurozone left equities in Europe cold. The rising chance of a mid-year rate-hike in the US after Friday’s strong unemployment report took the spark out of the run higher enjoyed by European stocks so far this year.”
With markets in France and Germany also turning sharply lower, the FTSE 100 Index staged a muted recovery as the day progressed and ended the session down 16.29 points at 6,837.15.
Uncertainty in the markets helped to prop up defensive plays such as gold miners, with Randgold Resources adding 105p to 5,415p and Fresnillo jumping 36p, or 4.2 per cent, to close at 896p.
Oil and gas explorer BG was also among the climbers after it said new chief executive Helge Lund had started a month early. Shares in the group, which last week took a multi-billion pound hit from the plunge in crude prices, ended the day up 28.1p, or 3 per cent, at 963p.
The biggest blue-chip faller was drug firm Shire, which is due to post its annual results on Thursday. It closed down 171p at 4,741p, a decline of 3.5 per cent.
Commercial property group Land Securities also took a tumble, dropping 30p, or 2.3 per cent, to 1,272p. The firm is about to start work on a £440 million retail and leisure joint venture in Oxford, due for completion in the autumn of 2017.