The FTSE 100 closed 44.68 points, or 0.8 per cent, lower at 5,707.30, its biggest one-day percentage drop since 25 August. The index has risen more than nine per cent since the start of September.
Banks were out of favour after UBS’s results and as uncertainty on the global economic outlook kept optimism on more cyclical equities in check. Barclays and Royal Bank of Scotland both fell 1.4 per cent.
“(The FTSE) is pretty weak... the UBS figures have caused a lot of pressure, which has permeated (the wider market),” said Joe Rundle, head of trading at ETX Capital, said.
Miners, which notched up good gains in the previous session, took the most points off the index. BHP Billiton, down 2.5 percent, was the biggest laggard in the sector.
Insurers fell, hurt by a note from BofA Merrill Lynch which downgraded the sector on valuation grounds after a strong run over the past few months. Prudential lost 1.7 per cent.
“The market has had a good run since late August and it appears to be on an upward, sawtooth trend,” said Peter Dixon, economist at Commerzbank.
Cairn Energy topped the blue-chip fallers’ list, shedding 7.2 per cent. The oil explorer said one of its wells in Greenland did not result in a commercial discovery, and another failed to reach the target depth before the end of the Arctic drilling season.
ARM Holdings was also on the back foot, down 5.9 per cent, as strong results and a bullish tone from the British chip designer were drowned out by a warning of faltering consumer demand from key customer Texas Instruments.
Cruise company Carnival grabbed the top spot on the FTSE 100 leader board, up 4.3 per cent,
Equities showed almost no reaction to data early in the session showing the positive news that Britain’s economy grew twice as fast as expected in the third quarter.