FTSE 100 finished firmly in the red as the strong pound weighed after the Bank of England's hawkish comments on rate rises.
The premier bluechip index closed down over 108 points at 7,170, while FTSE 250, the more UK company focused index, crashed almost 364 points lower at 19,327.
Against the Euro, the pound is ahead by 0.37% at 1.1360 and versus the US dollar, it is up 0.36% at 1.3921
"The jump in sterling on the back of the Bank of England (BoE) update, whereby the Governor, Mark Carney, stated rates could move higher than anticipated is holding down the British market. A firmer pound has a track record of weighing on the FTSE 100, and we are seeing history repeating itself," said David Madden, at CMC Markets.
He suggests too that investors remain unconvinced that panic has disappeared from the markets after the recent plunge.
Top loser on Footsie was miner Evraz (LON:EVR), which dropped 5.10% to 336.20p.
Brent crude, meanwhile, shed 2.02% to US$65.51 a barrel.
Gold lost 0.69% to US$1,315.45 an ounce.
The Footsie stayed weak in late afternoon trading as US stocks dropped back once more in early deals, weighed by a jump by sterling after the Bank of England hinted that another rate hike could come sooner than expected, although rates were left unchanged after its latest meeting.
On currency markets, the pound was 1.2% higher versus the dollar at US$1.4039, and rose 1% against the euro to ?,?1.432 .
The FTSE 100 index - which is chock full of dollar earners - was down 60 points at 7,219, albeit holding off the day's low of 7,194.44 hit following the BoE news.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics noted the Bank of England has brought a May rate hike into play by stating that it thinks interest rates "...would need to be tightened somewhat earlier and by a somewhat greater extent" over the next three years than anticipated in November.
But Tombs added: "All told, then, the MPC has signalled to markets that a May rate hike is under active consideration, but is far from guaranteed. With the economy still lacking real momentum, Brexit talks likely to progress slowly and the housing market showing significant signs of stress, we still think that the MPC will hold back until August."
Meanwhile, on Wall Street, after half an hour of trading, the Dow Jones was off another 130 points at 24,764, with the broader S&P 500 and tech-laden Nasdaq composite both lower as well.
Watch out for 24539 support on the Dow. Potential head and shoulders neckline. Beairsh short term picture in play if we break and hold below there #DJIA pic.twitter.com/kLNoSX6e7C
- Joshua Mahony (@JMahony_IG) 8 February 2018The US market resumed the recent sharp falls seen on concerns that rising inflation will lead to more US rate hikes than already expected this year, boosting bond yields.
The FTSE 100 index remained weak early afternoon as the pound jumped after the Bank of England upped its UK growth forecast and hinted that another rate hike could come sooner than expected, although its policy committee was unanimous about keeping rates pegged at its latest meeting.
On currency markets, sterling gained 1.1% versus the dollar at US$1.4023, and resumed gains against the euro, up 1% to ?,?1.434 .
Meanwhile, the Footsie - laden with dollar earners - lost 51 points at 7,228, but came further off the session low of 7,194.44 hit following the BoE news helped by expectations for a modest rally by US stocks today.
After recent volatile sessions across the Atlantic, the Dow Jones futures pointed to a small rise after a 19 point decline yesterday as the wild swings of the past few day's settle down.
The market is trying to stabilise after recent sharp falls on concerns about that rising inflation will lead to more US rate hikes than already expected this year.
US data today showed initial weekly jobless claims fell by 9,000 to 221,000 in the seven days ended February 3 lower than forecasts for 235,000.
Contract caterer Compass Group PLC (LON:CPG) was top FTSE 100 gainer at lunchtime, gaining 4.6% at 1,503.5p after it said organic revenue grew by 5.9% in its latest quarter driven by strong levels of new business wins and retentions.
North America was the star in the three months to December with revenue 8.2% higher, while Turkey and Latin America also did well.
The catering giant has had to cope with the recent death of chief executive Richard Cousins, who was killed with his family in a plane crash near Sydney.
Elsewhere, blue chip advertising giant WPP LC (LON:WPP) was also in demand, adding 2.1% at 1,288.5p as 2017 earnings from its rival Publicis met analysts' expectations and the French company said organic growth improved throughout 2017.
Drugmaker GlaxoSmithKline got a boost too, up 1.7% to 1,307.8p after ViiV Healthcare - the global specialist HIV company majority-owned by the group with Pfizer Inc. and Shionogi Limited as shareholders - said it has filed patent infringement litigation against Gilead Sciences over bictegravir in the US and Canada.
Separately, Glaxo also announced that ViiV Healthcare has launched an eighth phase III study in two-drug regimen programme for an HIV-1 treatment.
But medical products group Smith & Nephew PLC (LON:SN.) was a FTSE 100 faller, down 2.5% to 1,216p despite seeing its revenues rise in 2017, with pre-tax profit falling by 17%.
In the 12 months ended December 31, S&N's revenues grew 2% to US$4.77bn (2016: US$4.67bn), slightly below consensus for US$4.78bn, while pre-tax profit was US$879mln, down from US$1.06bn a year earlier and also short of the consensus estimate for US$901mln.
Among the welter of reactions to the Bank of England announcements, Ben Brettell, senior economist at Hargreaves Lansdown commented: "The extravagantly titled 'super Thursday' from the Bank of England doesn't always live up to its billing. But today's Inflation Report contains some key takeaways for investors and economy-watchers."
Brettell noted that the Bank upgraded its forecast for the UK economy slightly today, citing stronger global conditions.
"It now expects 1.8% growth this year, as against 1.6% forecast in November. Policymakers also said they will try and bring inflation back to their 2% target more quickly than previously, which means rates could rise faster and further than investors had expected," the economist said.
Some key charts from the BoE QIR.
Market path of 3 hikes over 3 years broadly endorsed. Spare capacity estimated at just 0.25% & potential growth at just 1.5%. Demand growth to be slightly above trend at 1.7-1.8%, so while inflation now peaked, doesn't return to 2% until 2021 pic.twitter.com/DDT3tzmgia
He added: "It now looks like the next rise could happen as soon as May - the next time the Bank's economic forecasts are due to be updated. Prior to today's announcement, markets were factoring in a 50% chance of a rate rise in May, and an 80% chance they'll be higher by the end of the year."
Sterling jumped on the news, rising more than a cent against the dollar to break through the US$1.40 barrier once again, while gilt yields rose in anticipation of higher interest rates, and the FTSE 100 extended the day's modest losses.
Today's BoE news comes amid investor concerns that faster growth and higher inflation could prompt central banks across the globe to tighten monetary policy more aggressively which have led to massive volatility in global stock markets this week.
At 12.35pm, the FTSE 100 index eased off the day's low of 7,194.44 hit following the BoE news but was still down 65 points at 7,214.
On currency markets the pound held a 0.8% jump versus the dollar at US$1.3980 but lost all its gains against the euro to trade flat at ?,?1.437 following BoE comments on Brexit.
Brettell noted: "On the subject of Brexit, the Bank sounded a note of caution, saying it remained the key source of uncertainty. Future decisions on interest rates will therefore depend heavily on progress in negotiations with the EU."
The Footsie dropped to session lows at midday as the pound jumped following news the Bank of England Monetary Policy Committee unanimously voted to leave UK interest rates unchanged at its latest meeting but hinted that they may rise more quickly than expected.
Around 12.10pm, the FTSE 100 index was down 78 points at 7,201, having eased slightly off the day's low of 7,194.44 hit following the BoE news.
Rate hike probability for the UK jumps for the March and May meetings from 6% to 11% for March and from 50.6% to 62% for May. #BOE #SuperThursday pic.twitter.com/PGhL7iZfJ0
- James Hughes (@James_HughesUK) 8 February 2018On currency markets, having been fairly flat ahead of the UK rate decision, sterling jumped 0.8% higher versus the dollar to US$1.3979 and gained 0.9% against the euro at ?,?1.425.
David Cheetham, chief market analyst at XTB.com commented: "The strong move is largely due to a comment in the accompanying statement which said that the bank may need to raise rates earlier and faster than they forecast back in November.
"The GBPUSD pair has jumped around 1% following the announcement to retest the 1.40 handle and the FTSE has fallen to its lowest levels of the day."
He added: "The appreciation in Sterling is particularly bad for stocks and the blue-chip index could be set for some more downside ahead given these adverse FX moves and the fragile global backdrop for equities of late given the rapid recent declines."
Investors put a record ?63bn into funds in 2017, taking the total amount invested within the funds industry to ?1.2trn, also a record level, according to Investment Association data released this morning, with fund investors making on average 10% in 2017.
Fixed income was the best-selling asset class with net retail sales of ?14.3bn, while over ?1bn was invested in Ethical funds for the first time.
2017 was a record breaking year for IA members with funds under management reaching an unprecedented ?1.2 trillion! For all the figures: https://t.co/fJnle8xueY pic.twitter.com/Ew98dSTJfj
- The Investment Association (@InvAssoc) 8 February 2018The data also showed that Tracker funds now make up 13.5% of all funds under management, while UK equity funds continued to see outflows.
Commenting on the numbers, Laith Khalaf, senior analyst at funds platform group Hargreaves Lansdown said: "Rising markets, an improving global economy and low interest rates no doubt all contributed to the record level of investment."
He added: "If you knew in advance that 2017 would feature rising inflation and the first UK interest rate hike in ten years, you wouldn't have predicted a great deal of investment in bond funds, nonetheless these vehicles were the surprise winners when it came to attracting money last year."
Caution remained the watchword for the Footsie ahead of the welter of Bank of England news at midday, while the pound ticked higher.
James Hughes, chief market analyst at AxiTrader commented: "It's Super Thursday, the day when the BoE releases its interest rate decision, its quarterly inflation report and the meeting minutes from the current MPC, which gives us an indication of how the members voted.
"Added to all of the this, at the same time as the quarterly inflation report is released the Bank of England Governor Mark Carney will hold a press conference to explain and expand on the MPC meeting and reasons behind the moves."
Your one-stop guide to today's 'Super Thursday' Bank of England meeting and what we expect from the markets. pic.twitter.com/9IAJtaTEig
- ING Economics (@ING_Economics) 8 February 2018Hughes continued: "There is added importance on the voting record of the members as current probability puts the potential of a further rate hike in May 2018 on a knife edge with a 50.4% likelihood of a hike of 25 bp. At December's meeting, the vote was a simple 9-0-0 in favour of leaving rates unchanged, however a move of just two members to the more hawkish side of the spectrum would greatly increase the likelihood of a hike in May.
"The key players in this will be the members McCafferty and Saunders, the two of have been at the forefront of rate hike discussions of late. A tick from the two of them in the rate hike column would leave Sterling with a degree of upside to catch up on. However, another 9-0-0 vote today won't necessarily mean that the rate hike is totally off the table and would likely just see an increase in probability for a hike later in the summer."
Ahead of the midday announcement, sterling rallied 0.1% higher versus the dollar at US$1.3882, and extended gains against the euro to US$1.1342.
Meanwhile, around 10.40am, the FTSE 100 index had narrowed its losses to 49 points at 7,230, recovering from session lows of 7,215.60.
The FTSE 100 index had extended its falls by mid morning, tracking volatile trading in other global markets and some nervous ahead of a 'Super Thursday' of news from the Bank of England at midday.
Around 10am, the UK blue chip index was down about 58 points at 7,220, just above the session low of 7,215.60 as yesterday's 138 point rally was halted.
On currency markets, the pound was mixed awaiting the first Bank of England interest rate decision of 2018, together with the publication of minutes from the Monetary Policy Committee meeting and the latest quarterly inflation report last today.
Bank of England's "Super Thursday" preview https://t.co/ynnJ7me1k0 pic.twitter.com/QxPX80dBQF
- Jasper Lawler (@jasperlawler) 8 February 2018Against the dollar, sterling was down 0.1% at US$1.3863, while versus the euro it edged up 0.1% at ?,?1.1333.
Among equities, Sophos Group PLC (LON:SOPH) remained one of the top market fallers in mid morning trading, down 12% to 546.5p after an update from the FTSE 250 listed cloud-enabled network security solutions provider disappointed, leading Numis Securities to downgrade its rating to 'hold' from 'buy'.
The Numis analysts noted that Sophos' third-quarter growth of 14% at constant currency looked light compared to first-half growth of 23%, although they said the 9 month year to date growth of 21% still leaves full-year guidance looking achievable if the quarterly is sustained.
"Overall however," the analysts added, "the slowdown in billings is a little worrisome, particularly given the renewals tailwind in the quarter, but probably more significantly, the beat-and-raise pattern at Sophos looks to be, at least temporarily, on hold for now, as is our recommendation."
Another big FTSE 250 faller was TalkTalk Group PLC (LON:TALK), down 11% at 106.5p after the telecoms provider unveiled a ?200mln share placing, cut its full year earnings guidance and reduced its dividend as it plans to invest in rolling out fibre broadband to UK homes.
The company is in talks with Infracapital, the infrastructure equity investment arm of M&G Prudential, over a ?1.5bn investment to bring fibre to the premises (FTTP) to over three million households.
And FTSE 100 listed travel firm Thomas Cook Group PLC (LON:TCG) lost 4.6% at 119.5p as s it reported quarterly revenue growth but warned the airline sector remains "highly competitive" and "unpredictable"
The owner of German airline Condor posted a 7% increase in revenue to ?1.7bn in the first quarter to December 31, and the company left its full year guidance unchanged following a good start to the year.
After the storm we've now got an uneasy calm with the FTSE 100 down just 25 points at 7,254.38.
Wall Street was similarly subdued, while some Asian markets actually managed to chalk up gains.
Weaker oil prices were hampering energy stock, as was the stronger dollar, which also had an impact on the commodities stocks.
Counter balancing this slightly was some exceptionally strong import data from China, the world's second-largest economy.
Shares in the telco TalkTalk (LON:TALK) fell 18% after it unveiled plans to tap investors for ?200mln required to strengthen its balance sheet.
A trading statement from the cloud software group Sophos (LON:SOPH) went down with the market about as well as a bucket of cold sick with shares losing almost 15% of their value in the early minutes of the session.
On the plus-side, catering giant Compass (LON:CPG) rose 6% after it updated the market on recent trading.
Driver fatigue monitoring technology developer Seeing Machines Limited (LON:SEE) said it is trading in line with expectations for the current financial year. Fleet total contract value signed with customers, but not yet delivered nor recognised as revenue, has increased from A$21.5 million at 30 June 2017 to A$36.4 million at the end of 2017.
Thor Mining PLC (LON:THR) (ASX:THR) has halted trading in its shares on the Australian stock exchange ahead of a new resource statement for the Kapunda copper mine. Project developer Terramin Australia (ASX:TZN) has informed Thor that the JORC 2012 inferred resource will be larger than the previous resource estimate (produced in 1992) and cover the part of the deposit amenable to in-situ recovery methods.
Whilst it is not a particularly busy time for 88 Energy Ltd (LON:88E), as the company continues to wait out the Alaskan winter, some corporate activity is afoot. 88 Energy on Thursday told investors that share trading under its Australian listing has been halted, pending a news announcement related to the underwriting of listed options.
Sound Energy PLC (LON:SOU) told investors it is now advancing its exploration campaign in eastern Morocco, boosted by initial work in the 2018 programme. "We are now moving forward with our exploration drilling programme with a view to unlock three of our largest plays," said James Parsons, Sound Energy chief executive.
Avacta Group Plc (LON:AVCT) said it is looking to Asia to find a partner as it spelt out the milestones for its Affimer therapeutics and reagents up until 2021. Speaking at a capital markets day, Alastair Smith, chief executive, said that by 2021 Avacta wants to have a recurring revenue stream from Affimer reagent licenses and to be a clinical-stage biotech with multiple clinical stage programmes.
Jubilee Metals Group PLC (LON:JLP), in an after market close statement, told investors that associate BMR Group now understands that it has the right to appeal at the Kabwe project. "Jubilee will support BMR to favourably conclude this process," the company said.
A team led by Scancell Holdings Plc's (LON:SCLP) chief scientific officer that is pioneering a vaccine-led approach to tackling tumours has been shortlisted for ?20mln award. Professor Lindy Durrant is teaming up with researchers from Genentech, BioNtech and ISA Pharmaceuticals to develop Project Blueprint.
Stobart Group Limited (LON:STOB), the infrastructure and support services group, said it was notified, on 7 February 2018, that Andrew Tinkler, an executive director of the company, acquired 100,000 ordinary shares in the company at a price of 238.8p each. Following the purchase, the firm added, Tinkler holds a beneficial interest in 27,326,811 ordinary shares, representing approximately 7.71% of the company's issued share capital.
Papua Mining PLC (LON:PML), the UK company focused on exploration and development of gold and copper deposits in Australia and Papua New Guinea, announced that it has published an updated company presentation on its website today.
The FTSE 100 is set to start Thursday's trading on the back-foot amid further volatility global equity markets.
On Wall Street, another relatively active and back-and-forth session ended with less dramatic closing levels. The Dow Jones was down 19 points or 0.07% at 24,893, the S&P 500 was 0.5% lower at 2,681 and the Nasdaq Composite had dipped 0.9% to finish at 7,051.
In Asia, Japan's Nikkei strengthened by more than 1% to trade at 21,890. Hong Kong's Hang Seng added 0.43% rising to 30,444 whereas the Shanghai Composite shed 1.3% down to 3,265.
In the UK, meanwhile, equities are seen lower. IG Markets reckons on an opening loss of around 50 points for the FTSE 100.
The CFD and spreadbetting firm is calling London's blue-chip benchmark at 7,225 to 7,229 with just over an hour to go until Thursday's opening deals.
City analysts see the market volatility continuing.
"When markets undergo the magnitude of volatility seen over the past few days, there are bound to be additional aftershocks in the days afterwards, which means that we will continue to see choppy price moves in the days ahead," said Michael Hewson, analyst at CMC Markets.
In terms of corporate news there's a trio of high profile results statements in the schedule - with statements due from Smith & Nephew, Bellway and Compass.
The Bank of England may meanwhile provide the day's big trading triggers as it releases its latest inflation report.
Bank of England MPC meeting: Minutes, quarterly inflation report
Trading updates: Compass Group PLC (Q1) (LON:CPG), Bellway PLC (LON:BWY), AA plc (Q4) (LON:AA.), TalkTalk PLC (Q3) (LON:TALK), Thomas Cook PLC (Q1), Tate & Lyle PLC (Q3) (LON:TATE), DFS Furniture Plc (LON:DFS), Sophos PLC (Q3) (LON:SOPH), Ei Group PLC (LON:EIGE)
Finals: Smith & Nephew PLC (LON:SN.), Beazley PLC (LON:BEZ)
Interims: Ashmore group PLC (LON:ASHM)
FTSE 100 ex-dividends: Sage Group PLC (LON:SGE)
Economic data: RICS UK house price survey; US weekly jobless claims