The FTSE 100 has closed at its lowest point since July last year, marking another choppy day for London’s top index.
It remained below the 7,000 mark throughout the day and took a hit in late afternoon trading, ending 128.3 points lower, or 1.77%, at 6,881.59.
It came a day after the Bank of England took emergency action by unveiling a bond-buying programme aimed at stemming spiralling gilt yields and preventing pension funds from collapsing.
The move seemed to briefly soothe investors’ concerns and the FTSE 100 stabilised while the pound managed to recover losses from earlier in the day.
But it plunged back on Thursday after the Prime Minister took to the airwaves to stand by the Government’s controversial fiscal policy decisions, followed by similar comments from the Chancellor.
Sterling was on much stronger territory on Thursday, floating well above 1.08 against the US dollar and hitting around 1.1033 dollars when European markets closed.
Against the euro the pound dipped around 0.1% to 1.262 euros.
Fawad Razaqzada, a market analyst at City Index and Forex.com, said: “The Bank of England’s intervention has calmed the bond markets somewhat, with yields coming down not just in the UK but the eurozone and US too.
“As a result, we are seeing bearish speculators eased off the gas a little, and this is providing some relief for beaten-down currencies such as the euro and other risk assets.”
Other European markets were also in the red, with the German Dax declining 1.71% and the French Cac falling 1.5%.
There was no relief across the pond as the S&P 500 had dropped 1.8% and the Dow Jones by 1.26% when European markets closed.
In company news, shares in Mitchells & Butlers slid after the pubs and bars giant cautioned over disrupted sales from the summer heatwave and rail strikes.
The All Bar One owner said cost inflation had put pressure on margins, but it still posted growing sales after the past quarter.
Its share price was down by almost 15% at the end of the day.
Fashion giant Next warned of similar headwinds facing the retail sector, warning of weak sales in August as customers faced a cost-of-living surge.
It said profits are expected to be around £840 million for the current financial year, below previous estimations of £860 million.
Its share price dropped by more than 12% on Thursday.
Ted Baker announced that its shareholders had overwhelmingly approved a £232 million takeover offer that will see the business go private.
It means the fashion retailer would be bought by Authentic Brands, which own Forever 21 and Reebok, after Ted Baker put itself up for sale amid troubles following the pandemic.
Shares in Ted Baker edged up by 0.18%.
The biggest risers in the FTSE 100 were Rolls-Royce, up 1.56p at 68.26p, BAE Systems, up 16.2p at 825p, Glencore, up 6p at 486.75p, Anglo American, up 31.5p at 2,760p, and Reckitt Benckiser, up 56p at 6,124p.
The biggest fallers on the index were Barratt, down 47.3p at 323.4p, Next, down 650p at 4,674p, Ocado Group, down 53.1p at 469.3p, Auto Trader, down 45.9p at 495.1p, and Rightmove, down 39p at 466.6p.