The top share index swung lower by midday on Wednesday in volatile trade, with the market coming under pressure after sharp rise in unemployment and a cut in growth forecasts by the Bank of England.
London's blue chip index <.FTSE> erased early gains to fall 49.57 points, or 0.9 percent to 5,467.87 by 11:45 a.m., and in tandem with Wall Street futures which pointed to a sharply weaker open in the United States.
Financials, a gauge of investors' view of the global economic outlook, fell across the board. Fund management group Schroders
Heavyweight miners were lower too as the outlook for demand darkened, with Vedanta
There has been a step back from trading by institutions and we have seen a lack of market depth which in turn has led to intraday volatility, said Martin Dobson, head of trading at Westhouse Securities.
Trading tends to be triggered by any news from Europe and the bond market with the contagion worries jumping between the perceived 'at risk' issuers.
Trading across the FTSE remained extremely choppy, with the FTSE volatility index, a gauge of investor nervousness, up 14.9 percent in November.
Traders said economic data out of the UK added to the gloom and uncertainty hanging over the markets and showed how much Europe's debt problems are weighing on broader economic growth.
The jobless rate hit a 15-year high, as the number of young people out of work soared to a record of more than 1 million, with the government blaming the euro zone's debt crisis for the figures.
The Bank of England sharply revised down its near-term growth forecasts, and now sees a strong chance that annual growth rates will be below 1 percent throughout 2012.
In its quarterly Inflation Report, the Bank indicated it might have to add to its 275 billion pound asset purchase programme.
EUROPE HITS CORPORATES
Analysts further cut their 2011 and 2012 earnings forecasts for STOXX Europe 600 .STOXX companies, according to Thomson Reuters I/B/E/S, as the euro zone sovereign debt crisis threatens to hamper economic growth.
Ex-dividend factors also took a hefty 15.28 points off the FTSE 100, mostly accounted for by market heavyweight Vodafone
Italian and Spanish bond yields -- which have spooked investors over the past two weeks -- remained high, a sign investors do not believe the counties can escape the debt contagion, despite the European Central Bank stepping in to stem an accelerating sell-off of euro zone government bonds.
On the upside, investors continued to reward companies taking steps to increase their earnings in austere conditions.
Aircraft parts supplier Meggitt
On the broader FTSE, Severfield Rowen
(Additional reporting by Dominic Lau, Jon Hopkins)
(Editing by Jane Merriman)