The British capital's benchmark FTSE 100 shares index slid 0.5 percent at midday, as survey data showed the pivotal services sector shrank last month, weighing also on the pound.
Sentiment soured in Asia after a below-par US jobs report stoked worries about the world's top economy, while the WTO fanned fresh trade war fears by allowing Washington to impose tariffs on the European Union.
However, there were modest gains elsewhere in Europe on Thursday as investors fished for bargains after this week's selloff, while Frankfurt was shut for a holiday.
"The FTSE 100 is back in the red... as fears over the global growth picture and a tit-for-tit trade war between the US and EU continue to dent sentiment," said IG analyst Joshua Mahony.
"The huge losses seen yesterday have eased somewhat in Europe, with traders taking stock after a huge slump in global markets."
In Britain, fresh data sparked concern that the country could be heading for recession, defined as two successive quarters of economic contraction.
The IHS Markit/CIPS UK services purchasing managers' index (PMI) showed a reading of 49.5 in September, down from 50.6 in August. A figure below 50 indicates contraction, while above signals growth.
The services report follows PMI surveys which showed that output also fell across both construction and manufacturing.
"With downbeat data pouring in from all angles and on across both sides of the Atlantic, investors are struggling to find much to cheer," said City Index analyst Fiona Cincotta.
"PMIs proved to be a hat-trick of disappointment; the UK is almost certainly heading towards recession in the third quarter," she told AFP.
The data came one day after Prime Minister Boris Johnson issued his "final" Brexit proposals and warned that Britain would leave the EU without a deal on October 31 if they were not accepted.
Wall Street plunges again
Wall Street had plunged overnight -- with all three main indices falling more than one percent for a second day -- and shifted into safer assets such as gold.
On Wednesday, data from payrolls firm ADP showed US companies added far fewer jobs than expected last month.
That followed news of the weakest US manufacturing conditions since 2009 at the height of the financial crisis.
The figures also come before the release of non-farm payrolls data Friday that are closely watched for a gauge on the health of the economy.
The weak US data has ramped up the possibility the Federal Reserve will cut interest rates for a third time this month, weighing on the dollar.
Just as Washington and Beijing prepare for high-level trade talks this month, the WTO provided markets with a fresh headache by ruling that the EU had given illegal support to plane-maker Airbus, allowing the US to impose billions in tariffs on the bloc.
Washington later announced a series of levies starting on October 18.
Key figures around 1100 GMT
London - FTSE 100: DOWN 0.5 percent at 7,087.30 points
Paris - CAC 40: UP 0.5 percent at 5,447.74
Frankfurt - DAX 30: Closed for a public holiday
EURO STOXX 50: UP 0.3 percent at 3,422.59
Tokyo - Nikkei 225: DOWN 2.0 percent at 21,341.74 (close)
Hong Kong - Hang Seng: UP 0.3 percent at 26,110.31 (close)
Shanghai - Composite: Closed for a public holiday
New York - Dow: DOWN 1.9 percent at 26,078.62 (close)
Euro/dollar: DOWN at $1.0956 from $1.0959 at 2100 GMT
Pound/dollar: DOWN at $1.2290 from $1.2303
Dollar/yen: UP at 107.34 yen from 107.18 yen
Brent North Sea crude: DOWN 0.1 percent at $57.64 per barrel
West Texas Intermediate: DOWN 0.4 percent at $52.44