FTSE fell 6.6 points to 5254.36 this morning as investors woke up to the prospect of a hung parliament.
Panic on the opening bell caused the blue chip index to lose 100 points but it later recovered.
“Sterling has been the worst affected by the news of the hung parliament but there has undoubtedly been a secondary impact on the UK stock market,” an analyst from Nomura said.
The poor performance of the UK’s leading shares was also impacted by euro zone debt fears and sharp falls overnight on Wall Street and in Asia.
Overnight on Wall Street, the Dow fell as much as 9 per cent in the session before recovering to close 3.2 per cent lower, as technical trading glitches and Europe's debt crisis sent waves of dread through global markets.
“The events in the U.S. overnight show just how much anxiety there is among investors. The reasons behind such a big fall remain unclear and are also weighing on sentiment,” said Richard Hunter, head of UK equities at Hargreaves Lansdown.
Banks were the sharpest fallers with Royal Bank of Scotland, Barclays and Lloyds Banking Group decreasing by 2.1 to 3.2 per cent. HSBC rallied, up 2.8 percent after an upbeat first-quarter trading update.
Analysts said investors were nervous about a hung parliament as questions remain over the new government's ability to tackle the country's huge deficit.
The FTSE has shed almost 6 per cent in the past week and is down 3 per cent for the year-to-date. But the early panic didn’t last.