House builder Persimmon was the biggest blue chip faller as traders fretted that interest rates will rise sooner than had previously been expected.
Positive data on both sides of the Atlantic had a perverse effect on markets as investors reasoned that central banks will withdraw their stimulus as the economic picture improves.
Concerns over unrest in the Middle East and a failure to match forecasts by the world’s largest retailer, Walmart, also weighed on sentiment.
Michael Hewson, senior analyst at CMC Markets, said: “European stock markets have continued to feel the weight of imminent taper tension, dropping sharply as economic data continues to broadly improve, while company earnings announcements have generally missed expectations.”
The FTSE 100 Index closed 104.09 points or 1.6 per cent lower at 6,483.34. Top flight newcomer Persimmon was down 8 per cent at 1,089p as housing and building related stocks continued to retreat from the multi-year highs they hit during the Spring rally.
Suppliers Travis Perkins and Wolseley were both more than 4 per cent lower, at 1,555p and 3,122p respectively.
Among just four FTSE 100 risers, Imperial Tobacco made gains after maintaining its full year guidance despite difficult trading conditions.
Volumes for the first nine months of the year were down 7 per cent, but chief executive Alison Cooper hailed the company’s focus on costs and strategy. The world’s fourth-largest tobacco group, which sells brands such as Lambert & Butler and JPS, rose by 2.6 per cent or 55p to 2,209p.
In a quiet session for corporate results, cinema chain Cineworld fell 3.5p to 391p despite reporting a 24 per cent rise in half-year profits to £16.5 million, driven by a 10 per cent improvement in box office revenues. It faces tough comparisons in the current half from the success of Skyfall last year.
Shares in Flybe soared by almost 10 per cent amid rising demand for the regional airline’s stock following last week’s annual general meeting, at which new chief executive Saad Hammad outlined more details of his turnaround plan. The carrier closed up 6.75p at 77.25p, having hit 86.49p earlier in the session.