The FTSE 100 slid 0.6%, with multinationals including spirits company Diageo, pharma giants AstraZeneca and GlaxoSmithKline slipping about 3% as a strong pound meant the value of their U.S. earnings was lower.
Sterling recorded its biggest two-day rise in 10 months as no-deal Brexit worries took a break, after lawmakers voted to prevent Prime Minister Boris Johnson from taking Britain out of the European Union without a deal on Oct. 31.
Strength in the local currency lifted the more domestically focussed mid-cap index <.FTMC> by 0.2%, despite a 21% slump in CYBG to an all-time low. The Yorkshire Bank and Virgin Money owner said it expected to increase its provision for legacy payment protection insurance costs.
Stocks trading without dividend entitlement on the day such as BHP, Glencore and Micro Focus fell between 1.2%-3%, weighing heavily on the blue-chip index. Micro Focus is also set to be relegated from the index later this month.
Meanwhile, indexes on Wall Street and Europe scaled a one-month high as agreement by China and the United States to hold high-level trade talks in October spurred hopes that the trade dispute between the countries would be resolved.
"If one was feeling cynical, Thursday's rally could be used to illustrate investors' refusal to learn from their past mistakes, stung time and time again by a pair of superpowers who never manage to deliver on their trade talk promises," said Spreadex analyst Connor Campbell.
The FTSE 100 had suffered its only monthly fall this year in August when trade tensions escalated between the world's largest economies.
As investors turned to riskier assets on account of renewed trade hopes and away from safe haven gold, precious metals miner Fresnillo tumbled nearly 6% and was the steepest faller on the FTSE 100.
Industrial giants BAE Systems and Rolls-Royce helped limit the index's fall with gains of 1% each after French engine maker Safran hiked a profit forecast and Rafale warplanes maker Dassault Aviation affirmed a higher net sales target.
Another prominent gainer was turnaround specialist Melrose which jumped 9% after its first-half profit beat estimates.
On the mid-cap bourse, specialist media services company Future Plc surged 10% after upbeat forecast, while payments solutions provider Network International lost 7.5% as its major shareholder Emirates NBD Bank sold stock at a discount.
AIM-listed online fashion retailer Boohoo shot up by 15.1% to a life high after raising its annual revenue growth forecast and small-cap oil firm EnQuest climbed 7% after affirming its full-year production view and cutting debt.
(This story has been refiled to reinstate dropped word 'said' in paragraph 7.)
(Reporting by Shashwat Awasthi, Muvija M and Indranil Sarkar in Bengaluru; Editing by Bernard Orr)
By Muvija M and Indranil Sarkar