The FTSE 100 fell almost 1.5% to below 5,900 in midday trade on Thursday as strong growth figures from China prompted monetary tightening concerns.
London's leading index dropped 1.46% to 5,889.62 but has since recovered marginally to sit 1.36% lower.
China today posted economic growth of 10.3% for the 12 months, surpassing expectations, despite a final strong quarter based on robust industrial production and retail sales.
This growth rate, which has seen China overtake Japan as the world's second biggest economy behind the US, is driving concerns of monetary tightening by China in order to dampen inflation.
Nonetheless, inflation in China had actually cooled to 4.6% in December, after a 28-month high the previous month.
Global markets have been affected with Germany's Dax down 0.75% to 7,029.59, while France's Cac 40 fell 0.43% to 3,959.58.
In the UK, stock specific factors are also a drag on the index of leading shares. Associated British Foods is down 3.23% to £10.79 as rising commodity prices are denting margins, while the weather-affected sugar crop will slice annual profits.
Engineer Invensys is the biggest faller, down 7.11% to 332p, as orders fell at the rail division while reduced demand for controls has also trimmed profits.
Total funds on list rise from 26 to 58
What made financial headlines over the weekend?
Q2 net sales dropped almost 50%
‘Important to have an anchor’