A signal from the Bank of England that UK interest rates could increase sooner and more quickly than expected pushed the pound above $1.40 briefly. That put further pressure on the FTSE 100 index as a large number of constituents earn money in dollars.
The UK blue chip index had already started the day in a weak position, falling approximately 0.8% in value by midday. The Bank of England announcement extended the losses to 1.5% by the end of the session to 7,170.
Wall Street was also in the red. The Dow Jones was trading 1.6% lower at 24,504 at the time of the UK market close. Europe went the same way. Germany's Dax index traded 3% lower at 12,217.
From a sector view on the UK market, miners and tobacco stocks were among the main large cap fallers. Included in that pack, Evraz (EVR) fell 5.1% to 336.8p and Imperial Brands (IMB) dropped 2.8% to £26.83.
The top performer was catering group Compass (CPG), up 5.3% to £15.13 thanks to a positive trading update.
Compass said it expected 2018's performance to be above the middle of its 4% to 6% organic growth range for the year.
TOP MOVERS UP AND DOWN
Looking across the UK market on a broader basis, there was more bad news from TalkTalk (TALK) as the broadband and calls supplier slashed its dividend and announced a £200m rights issue to help fund investment in fibre broadband. Its shares fell 10.7% to 106.95p.
Once marketed as the 'fourth emergency service', shares in roadside recovery and insurance provider AA (AA.) tried to stage a comeback following a prolonged period of share price weakness.
The company's shares were initially up by more than 8% to 144.5p after reporting growth in new membership figures and a surge in breakdowns which it believes could increase future retention.
However, the mood changed as the day went on; AA lost all its gains to trade flat at 133.58p.
Shares in Vedanta Resources (VED) fell for a second day (down 0.6% to 755.4p) as a result of India's Supreme Court cancelling all licences to mine iron ore in Goa. Vedanta is India's biggest private producer and exporter of iron ore and has mines in Goa.
Holiday firm Thomas Cook (TCG) reported an 'encouraging start' to the new year despite running up hefty £42m of losses in the first quarter. It is a highly seasonal business so it is the months ahead that really matter.
The company also said it was on track to meet forecasts for its current financial year due to growth in its airline business and as it adds more holidays to Egypt and Turkey, holiday destinations previously hit by social unrest.
But already jittery investors were in an unforgiving mood, marking the stock 4% lower at 120.25p.
OTHER BITS OF CORPORATE NEWS
FTSE 250 cyber security firm Sophos (SOPH) felt the heavy hand of investors on Thursday as its latest trading update failed to live up to inflated expectations.
The shares, which have doubled in the past year, slumped 17.4% to 513.55p, another demonstration of what can happen when a stock is priced for perfection.
UK housebuilder Bellway (BWY) said revenue for the first half of its financial year would be 14% higher, after it sold more homes at higher prices. Completions rose 6.3% in the first half to 31 January while average selling prices increased 7.8% to a record £276,000.
Yet the share price fell 6% to £31.13, presumably due to the latest RICS report, which pointed to a rather subdued overall UK housing market.
Artificial hip and knee maker Smith & Nephew (SN.) scraped into the bottom of its guidance range for 2017, with a 3% rise in revenue to $4.77bn and a 20 basis point increase in its trading margin, resulting in profit of $1.05 billion. The shares dipped 3.1% to £12.08.
SMALL CAP NEWS
Among the small caps, quantum dots specialist Nanoco (NANO) shot up by 44.8% to 34.25p after signing a supply deal with a 'large, undisclosed' US-listed company.
Escher (ESCH) jumped 20.7% to 181p after receiving a 185p cash per share takeover offer from Hanover Investors.