The FTSE 100 ended down 1.4 per cent, or 71.73 points, at 5,145.74, its lowest close since 6 November, after the index finished down 1.1 per cent on Wednesday in a volatile session.
The index is down 4.9 per cent on the month, on track for its worst month since February 2009 but is still up 49 per cent since touching a six year trough last March.
Commodity stocks were the main weight on the index as raw material prices dropped, pressured after US weekly jobless claims and durable goods data cast more doubt on the idea that the global economy can make a swift recovery, sending US markets sharply lower.
Rio Tinto, Xstrata, Lonmin, Kazakhmys and BHP Billiton fell 2.5 to 4.3 per cent.
Persistent concerns over the fiscal health of Greece also fed into a sense that the markets face a rough ride in the coming months.
“The Greek thing is knocking around, the news out there is not good, its very nervy at the moment,” said Nick Serff, a strategist at City Index.
Energy stocks were also weaker as lower crude prices crimped demand for the sector. Cairn Energy, BP and Royal Dutch Shell fell 1.2 to 2.8 per cent.
Banks, which had been strong performers earlier in the day ended lower, pressured after an Standard & Poor’s report said the United Kingdom was no longer among the most stable and low-risk banking systems in the world, even though the report was an expanded version of a previous document.
Barclays, HSBC, Standard Chartered, Royal Bank of Scotland and Lloyds Banking Group fell 0.5 to 1.3 per cent.
AstraZeneca was the top blue-chip laggard, down 4.6 per cent after the Anglo-Swedish drugmaker gave a downbeat forecast for 2010 with fourth-quarter earnings that missed expectations.
Peers GlaxoSmithKline and Shire fell 0.8 and 1.6 per cent, respectively.
Carnival was the top performer among a select group of stocks in positive territory, up 1.6 per cent and reaching their highest level since September 2008 after rival Royal Caribbean’s fourth-quarter earnings beat market expectations.
Also among the gainers was British private equity firm 3i Group, which was 0.5 per cent higher after the company said it started 2010 in a strong financial position, building on the performance of the previous quarter.
“The weakness is a continuation of the concerns of overvaluation that have dogged markets for the past couple of weeks. With some significant data out of the US?today, any slight missing of expectations, with markets still clearly jittery, could mean a more prolonged sell-off,” said IG?Index strategist David Jones.