UK shares fell to their lowest in more than two years on Thursday, joining a wider market selloff, after the U.S. Federal Reserve bank dampened hopes for a milder policy outlook even as the global economy cools.
The FTSE 100 was down 1.3 percent at 0850 GMT after hitting its lowest since Aug. 4 2016 in early deals. Only three stocks – Shire, Severn Trent and British American Tobacco – were in positive territory.
The mid-cap index was 1.6 percent lower, its weakest since September 2016 partly tugged down by lacklustre response to builder Kier Group's rights issue.
The UK indexes are on track for their worst year since the 2008 financial crisis, and the Fed's tone deepened concerns already augmented by Brexit worries.
Despite calls by U.S. President Donald Trump for the Fed to stop raising interest rates, the central bank on Wednesday stuck by a plan to keep repealing support from an economy it views as strong, sending Wall Street spiraling down.
Banks with a larger international exposure were the biggest drags on the main index, with heavyweight HSBC dipping 2.3 percent as the weaker U.S. dollar weighed.
The Fed news and falling greenback also knocked mining stocks, with Antofagasta, BHP Group and Anglo American all down between 2.8 percent and 3.5 percent.
In news-driven moves, mid-cap construction firm Kier Group fell as much as 12 percent in early trade before trimming some of the losses as not even half of its shares were bought by shareholders in a fundraising. Its market value has already shrunk 64 percent this year.
Investors have dumped shares in the construction sector amid worries about mounting debts after Carillion's collapse and the impact of Brexit on real estate.
Among smaller moves, AIM-listed electricity and gas supplier Yu Group slumped 22 percent after it admitted to serious historical failures in an accounting review and said its profit would be hit as a result.