London (AFP) - London's leading share index dropped Thursday weighed by gloomy economic data while the Bank of England held interest rates at a record low.
Markets fell across Europe on the back of weak industrial output data and a growing crisis at Portugal's largest lender, Banco Espirito Santo.
Sentiment was also weighed down as Chinese exports fell short of expectations.
London's FTSE 100 dropped 0.68 percent to close at 6,672.37 points after the Bank of England held interest rates as expected at a record-low 0.50 percent.
France and Italy became the latest of Europe's biggest economies to post poor output data, with Italian production falling the most since November 2012, official data showed.
Germany and Britain have already issued disappointing figures for May, raising fears that Europe's economic recovery may be stalling.
"What really hurts shares today... are worries that the economic recovery in the eurozone might be already weakening again," broker Markus Huber at Peregrine & Falcon told AFP.
"Latest economic data out of Germany and also today from France and Italy are clearly seeming certainly to point this way."
Portugal was rocked by a crisis surrounding Banco Espirito Santo (BES), the biggest Portuguese bank by market capitalisation, sending the nation's bond yields higher as investors feared fallout from the scandal.
Portugal's market regulator halted trading in BES shares after they plunged over allegations that its parent company covered up a 1.3 billion euro ($1.8 billion) hole in the accounts.
London investors meanwhile essentially ignored the BoE's latest decision to maintain rates at 0.50 percent, where they have stood since March 2009.
Britain's central bank also opted to maintain the level of cash stimulus in the economy at Â£375 billion. Both decisions were in line with market expectations.
On the blue-chip FTSE index, Burberry was the top performer of the day, rising 3.17 percent to 1,464 pence after posting rising quarterly sales aided by strength in Asia and the Americas.
Sales gained 12 percent to Â£370 million in the three months to June 30, compared with a year earlier, the luxury fashion group said.
Randgold Resources was the second highest climber, gaining 2.75 percent to 5,235 pence.
Hargreaves Lansdown was the biggest faller, losing 4.41 percent to 1,128 pence, while Ashtead Group fell 3.88 percent to 878.5 pence.
Lloyds Banking Group was the most traded stock, with 123,78 million units changing hands, followed by Barclays bank with 91.46 million.
In foreign exchange activity, the pound eased to $1.7121 at 5pm, from $1.7125 the day before. It reached 1.2591 euros from 1.2567 euros over the same period.
The pound had jumped last Friday to a six-year high of $1.7180 in expectations that London could raise rates in the coming months.
In commodity deals on Thursday, haven investment gold soared to a near four-month high at $1,344.90 per ounce -- a level last seen on March 17 -- before easing slightly to $1,343.25.