The blue chip FTSE 100 fell from the day’s high of 7,034 down to 6,923, with a loss of 46 points. The domestically focused FTSE 250 also fell, dipping 167 points to 22,330.
An initial rally after the long weekend was led by travel shares, with the hope of easing travel restrictions and economic recovery. However, as the trading session began across the pond, the selloff also knocked London shares down.
The US indices tumbled with a steep decline in megacap stocks after a comment from treasury secretary Janet Yellen on rising interest rates, which triggered investors to move money to more defensive parts of the markets.
Nasdaq composite ended down 261 points, or 1.88 per cent, to 13,633, while the S&P 500 lost 28 points, or 0.67 per cent, to 4,164. The Dow Jones Industrial Average recovered its earlier losses and closed slightly higher, rising 19 points, or 0.06 per cent, to 34,133.
Highly valued technology companies including Microsoft, Alphabet, Apple, Amazon and Facebook fell between 2.3 per cent and 4.2 per cent.
Ms Yellen said rates will likely rise as government spending ramps up and the economy responds with faster growth.
On Wednesday, Japanese, South Korean, and Chinese stock market remained closed on account of a national holiday, however, the impact of global markets left Hang Seng and MSCI subdued, with the Hong Kong index trading flat while the broadest index of Asia-Pacific shares outside Japan recovered from the day’s lows.
Meanwhile, India’s stocks were off to a good start on Wednesday morning ahead of a scheduled presser from the governor of the Reserve Bank of India. All the sectors remained positive, with Sensex opening 250 points higher and Nifty trading above 14,550 in the early hours.