UK shares suffered their biggest fall in the first week of a year since 2000 despite steadying on Friday, after Chinese stocks regained some poise following a plunge the previous day that rattled global markets.
Strong US jobs data also supported the market. The index hit a three-week low on Thursday, when £33bn was wiped off its market capitalisation as stocks in China sank and Beijing allowed the biggest fall in the yuan in five months.
Some investor calm was restored, however, after Beijing suspended a circuit-breaker on its stock market that had stoked volatility rather than stemming it.
“A turbulent start to 2016 has seen investors adopting the brace position, as a combination of factors have driven global markets lower,” Richard Hunter, Head of Equities, Hargreaves Lansdown Stockbrokers, said in a note.
“With the Chinese deciding that the idea of a circuit breaker is broken... some stability returned to Asian markets overnight and London in turn.”
The FTSE 100 index spiked higher following a surge in US job growth and sharp revisions higher to employment in the previous two months.
However, the index drifted back to pre-data levels, with some traders expressing concern about a lack of wage growth.
The stand-out individual stock mover was Sports Direct, Britain’s biggest sportswear retailer, which dropped 15.4 per cent after it warned on full-year profit.
“We are confused by the warning... This feels like a clearing of decks exercise, but we need to shed more light on some key issues,” analysts at Jefferies said in a note, adding it was putting its “buy” rating on the stock under review.
Rising to the top of the British blue-chips was grocer Tesco, gaining 5.5 per cent on the back of a broker upgrade by Barclays.
Oil shares were in negative territory.