Markets across Europe suffered steep losses on Thursday as traders reacted to comments from central bankers from the UK and Europe.
"Early gains in equity markets proved unsustainable in the face of rising European yields and the unconvincing political backdrop," said senior sales trader Matt Basi from CMC Markets.
"Indices are now trading at their lows of the session with investors taking some risk off the table as markets lack the impetus to make force through the recent highs."
All eyes on the central banks
Stocks dropped into negative territory mid-morning as investors turned their focus to a Treasury Select Committee grilling of incoming Bank of England (BoE) Governor Mark Carney, who answered questions over his pay package, policies and nominal GDP targeting. All in all, Carney showed that he was willing to consider new approaches to policy, but said he was not keen to replace the inflation-targeting framework.
At midday, the BoE kept its Bank Rate at 0.5% and the asset purchase programme at £375bn, as expected.
In the accompanying statement the Monetary Policy Committee (MPC) said it continues to see a "slow but sustained recovery" but said that risks are "weighted to the downside, not least because of the challenges facing the euro area". The MPC also announced that it would re-invest the cash flows of £6.6bn associated with the gilt redemption due in March.
Analyst Simon Hayes from Barclays Research said: "This statement highlights the acute dilemma faced by the MPC. The weak activity outlook begs for more stimulus, but the inflation outlook is not sufficiently benign to make the committee comfortable expanding policy further. Assuming the recovery does take hold - and the early indications for Q1 are promising on this front - we would not expect the MPC to sanction more stimulus, but the debate remains live."
The European Central Bank (EBC), meanwhile, also kept hold of rates at its policy meeting today, as expected, but the focus was on bank President Mario Draghi at the subsequent press conference this afternoon. He addressed the recent rise in the euro and said that the strength of the single currency could post a threat to the inflation outlook. That was unexpected.
He said: "The appreciation is a sign of the return of the confidence in the euro. [...] We certainly want to see whether the appreciation, if sustained, will alter our risk assessment as far as price stability is concerned."
FTSE 100: Compass rises on strong first quarter
Contract caterer Compass was a high riser after having a good first quarter with expectations for the full year unchanged as its North America and emerging market business segments performing strongly.
Telecoms group Vodafone rose despite posting a 1.8% drop in revenue for the last three months of 2012, blaming difficult market conditions in Europe. However, the company reiterated that it expects adjusted operating profit in the upper range of £11.1bn-to-£11.9bn for the 2013 financial year.
Medical technology group Smith & Nephew was higher after beating forecasts in the fourth quarter. Investors managed to shrug off news comments about declining margins in 2013.
Travel and leisure firm TUI Travel gained after reporting a narrower operating loss in the first quarter as it outperformed in the UK and Nordic markets.
Meanwhile, Burberry sank after a series of boardroom changes. Market chatter also suggested that the stock was being weighed down by China's move earlier this week to ban luxury TV and radio ads for extravagant gifts, saying they promote "incorrect values and create a bad social ethos".
FTSE 250: Ophir falls on placing news
Shares in Ophir Energy fell after Credit Suisse confirmed that it has sold 36m shares
on behalf the investment funds of two stakeholders, Och-Ziff Capital Management and Mittal Investments. The news overshadowed a positive drilling update from the company out this morning about an appraisal well in Tanzania.
Online grocer Ocado jumped after reporting a 13% rise in revenue in 2012, helped by rising demand.
Trendy fashion brand SuperGroup also surged after unveiling a 12.3% increase in sales for the holiday season as shoppers stocked up on jackets, knitwear and gifting accessories.
FTSE 100 - Risers
Compass Group (CPG) 779.50p +1.83%
Smiths Group (SMIN) 1,225.00p +0.91%
TUI Travel (TT.) 306.30p +0.89%
Vodafone Group (VOD) 171.85p +0.88%
Amec (AMEC) 1,094.00p +0.83%
Smith & Nephew (SN.) 710.50p +0.71%
Capita (CPI) 798.50p +0.69%
Marks & Spencer Group (MKS) 378.00p +0.59%
Weir Group (WEIR) 2,078.00p +0.58%
Meggitt (MGGT) 436.50p +0.37%
FTSE 100 - Fallers
Burberry Group (BRBY) 1,337.00p -6.50%
Royal Bank of Scotland Group (RBS) 332.90p -2.69%
International Consolidated Airlines Group SA (CDI) (IAG) 211.20p -2.49%
Royal Dutch Shell 'A' (RDSA) 2,144.00p -2.43%
Tullow Oil (TLW) 1,178.00p -2.40%
Aberdeen Asset Management (ADN) 402.60p -2.31%
Polymetal International (POLY) 1,054.00p -2.23%
Standard Chartered (STAN) 1,650.00p -2.19%
BG Group (BG.) 1,111.00p -2.11%
BT Group (BT.A) 267.00p -2.09%
FTSE 250 - Risers
Supergroup (SGP) 730.00p +15.23%
Ocado Group (OCDO) 115.00p +10.68%
Beazley (BEZ) 199.00p +4.52%
Bellway (BWY) 1,161.00p +3.48%
Anite (AIE) 157.90p +3.07%
F&C Asset Management (FCAM) 108.50p +3.04%
Daejan Holdings (DJAN) 3,120.00p +2.80%
Sports Direct International (SPD) 432.80p +2.75%
Amlin (AML) 402.60p +2.70%
Ashmore Group (ASHM) 360.40p +2.68%
FTSE 250 - Fallers
Ophir Energy (OPHR) 475.00p -8.57%
Dairy Crest Group (DCG) 408.00p -3.32%
Salamander Energy (SMDR) 200.30p -3.19%
PZ Cussons (PZC) 403.00p -3.03%
International Personal Finance (IPF) 400.10p -3.03%
BTG (BTG) 330.20p -2.77%
RPS Group (RPS) 229.50p -2.75%
Drax Group (DRX) 606.00p -2.73%
SIG (SHI) 130.50p -2.47%
Jardine Lloyd Thompson Group (JLT) 796.00p -2.45%