The main index gave up 1.3%, capping off its worst weekly performance in over a year, while the FTSE 250 handed back earlier gains to close 0.7% lower.
After the World Health Organization (WHO) declared a global emergency over the China-linked virus, news that two patients had tested positive for coronavirus kept investors firmly away from risky assets.
"Dealers are dumping stocks for fear the health crisis will curtain economic activity in China, and to a lesser extent the rest of the world – should the situation keep spreading," CMC Markets analyst David Madden wrote.
Both British benchmark indexes shed more than 3% this month.
At home, the Bank of England's decision to keep interest rates unchanged supported sterling and hammered firms that earn largely in U.S. dollars.
HSBC, BP and Shell were among the biggest drags on the index.
Investment platform Hargreaves Lansdown was the biggest loser on the blue-chip bourse, dropping 8.2% as half-year results showed a slowdown in net new business growth.
A noteworthy gainer across the board was luxury carmaker Aston Martin, which soared 24% on its best ever day after Canadian billionaire Lawrence Stroll said he would take a stake in the company.
News-related moves spurred sharp declines among smaller stocks.
French Connection, the owner of Great Plains and YMC brands, tanked 31% - its steepest one-day drop on record - after it dropped plans to sell itself and said it would instead focus on a turnaround.
M&C Saatchi slid 10% as Britain's financial watchdog began a probe after the advertising agency revealed an accounting scandal last year, while fashion retailer Laura Ashley slumped 8% after its top boss stepped down.
AIM-listed Staffline stumbled 14% after the recruiter issued yet another profit warning.
"Given the lack of asset backing in the business, we expect that the banks will seek (Staffline) management to realise cash through disposals or find other sources of finance," Liberum analysts said.
By Shashwat Awasthi and Muvija M