The FTSE 100 finished the day 0.9 per cent lower, at 7,324 points, after tourism stocks dragged it down in the wake of terror attacks in Spain.
Some 13 people were killed and another 130 were injured yesterday when a van ploughed into a crowd on Las Ramblas in Barcelona, while a woman died of her injuries in a second attack in the Spanish town of Cambrils.
The attacks sent British Airways owner International Airlines Group 1.9 per cent lower, with shares closing at 624p, while EasyJet fell 0.9 per cent to 1,301p. InterContinental Hotels Group was also among the FTSE 100's biggest fallers, dropping 1.5 per cent to 3,988p, while Tui fell 0.5 per cent to 1,334p.
FTSE 250-listed Wizz Air fell two per cent in early trading, but later recovered to close at 2,866p, down 0.6 per cent.
David Morrison, senior market strategist at Spread Co, said the news from Spain "unnerves confidence in the current febrile atmosphere".
And Neil Wilson of ETX Capital, added:
As we’ve seen over the last couple of years in Europe, these kinds of atrocities affect tourism and will hit airline earnings. Investors are concerned that demand will fall over the rest of the year, which was already looking like it would be a tough patch for the industry.
Pharmaceutical companies were also hit after the €4.1bn (£3.7bn) takeover of German giant Stada by private equity firms Cinven and Bain Capital was given the go-ahead by shareholders.