The FTSE 100 Index slipped beneath the 5000 mark, signifying lack of confidence in the recovery of economy.
The Blue-chip shares dropped about 59 points to 4988.7 after stocks were rocked by worse-than-expected US unemployment claims. Rate of unemployment in US has soared to 9.8 per cent, highest in the last 26 years.
Rising rate of unemployment also dragged the US dollar down against major currencies.
In the early trading, crude for November delivery fell $1.14 per barrel at $69.68 in New York.
Figures compiled by the government agencies showed that the employers hacked 263,000 jobs in September, up from 201,000 in august.
Speaking on the issue, Gary Thayer of Wells Fargo Advisors, said, "We're probably still on track for recovery, but it's going to take time."
The Purchasing Managers' Index dropped to 46.7, the lowest level since June.