Britain's blue chip shares fell sharply on Thursday as traders took profits on an index that has outperformed Europe this year, with banks leading losses after comments by key policymakers.
The FTSE 100 closed down 66.92 points, or 1.1 percent, at 6,228.42, lagging major European peers.
The index has been the stand-out performer in Europe since the start of 2013, having seen its best January since 1989, and was ripe for profit taking, traders said.
"We haven't managed to break through 6,300 and hold it. I think it's just down to profit taking," said Darren Easton, director of trading at Logic Investments.
"I think 6,300 is becoming a bit of a sticking point."
Since posting its biggest one-day fall in three months on Monday, the index has failed to close above 6,300 all week.
However, the FTSE has gained 5 percent so far this year, compared to slight falls year-to-date on the German DAX and the French CAC.
Banks were among the biggest fallers on Thursday, with the sector dropping 1.6 percent after Bank of England governor-designate Mark Carney outlined a tougher line on the sector.
"He came across as much more aware of the need to be more interventionist in banking matters ... I think it's prescient, I think it's right, but banks will see the ability to grow revenues switched off," Gerard Lane, equity strategist at Shore Capital, said.
"Carney's use of anti-free market tools make it a very different ball game, and the banks in the UK are going to struggle."
Carney also reaffirmed his faith in flexible inflation rate targeting during an appearance before the British parliament, pouring cold water on nominal GDP targeting which he had previously floated as an alternative.
Nominal GDP targeting would justify higher inflation rates while growth was below target.
Sterling rose after Carney showed little bias towards immediate looser monetary policy, wrongfooting many investors who had expected him to be more dovish.
European Central Bank President Mario Draghi's comments in his monthly press conference also hit stocks after he said that the outlook for European growth would remain weak for the early part of 2013.
"Draghi's comments in the press conference that economic forecast risks are to the downside will have been very significant," Jeremy Batstone-Carr, analyst at Charles Stanley, said.
"There's been a combination of a number of factors today serving to remind investors that stockmarkets, through their performance, have got very much ahead of operating reality for many firms."
One such firm hit by changing operating realities was Burberry Group, which was the worst-performing blue-chip stock, tumbling 4.6 percent.
Rival luxury goods companies also fell as traders cited a Chinese advertising ban on certain expensive gift items as hurting the sector, undermining the assumption that strong demand from rich emerging market consumers could help support sales.
However, mobile phone operator and market heavyweight Vodafone provided basic support to the market. It rose 0.9 percent, bolstering the FTSE 100 index by 3 points alone, after the group maintained its outlook for the year and analysts expected the firm to dodge earnings forecast cuts, despite weak third-quarter sales.