The FTSE 100 neared its lowest level in nine months after gloomy retail sales posted earlier on Friday.
Britain’s blue-chip index was on track for its lowest close since November 2022, after falling as much as 1.25pc to 7,218.61.
However, the FTSE 100 pared losses during a late-afternoon rally and closed down 0.65pc at 7,262.43.
It continued the sharp decline which has seen the FTSE 100 shed nearly 400 points during the past six trading sessions.
It comes after British retailers on Friday reported a larger-than-expected decline in sales in July, as wet weather and persistent inflation saw cost-conscious shoppers spend more cautiously.
Retail sales volumes plunged 1.2pc last month, double the 0.6pc drop forecasted by analysts.
The latest figures will increase pressure on the Bank of England to control inflation, after the latest consumer price index and wage growth data released earlier this week suggested that interest rates could remain higher for longer.
The internationally-focused FTSE 100 has also been affected by growing concerns over China’s economic woes, which has weighed down stock markets across the world.
China has come under pressure this week after disappointing economic data fuelled fears over a prolonged slowdown, prompting the country’s central bank to unexpectedly cut interest rates on Tuesday in hopes of boosting post-pandemic recovery.
Investors are also concerned that troubles in China’s highly-leveraged property sector are spilling over into the nation’s wider economy.
