The FTSE 100 was down by 1.6% due to the political crisis in Portugual, which was inflamed last night when finance minister and leader of the junior partner in the coalition resigned.
Portugal's high borrowing costs have caused a crisis in the country and may hit their attempts at a recovery.
The slowdown in China's services sector and fears that the Egyptian crisis will push up oil prices have also contributed to the dismal display by international markets.
Cyprus's shock plans to impose a tax on bank accounts as part of its bailout package has seen the FTSE 100 fall by one per cent this morning with banks suffering the sharpest falls.
By 0829 GMT, the FTSE 100 was down 62.31 points, or one per cent, at 6,427.34.
The FTSE index has closed with another five year high - and all on the fourth anniversary of quantitative easing.
There is the usual mixed picture of economic data already this week, but the markets are in good place and are catching up.
And the Dow Jones broke its record today.
FTSE 100 directors' pay has risen over seven times faster than average wages, pay analysts have said.
According to Incomes Data Services (IDS), non-executive chairmen of top companies received average pay rises of six per cent last year, giving them earnings of nearly £400,000.
The research has revealed that among FTSE firms, average fees ranged from £270,000 in technology businesses to over half a million pounds in oil and gas companies.
Average fees for non-executive directors increased by four per cent last year, to £64,000.
The FTSE 100 index has risen slightly this morning despite the decision by Moody's to downgrade the UK from its elite triple A rating.
There were fears that agency's decision to cut the UK's rating to Aa1 would hit its financial markets.
Shortly after markets opened in London this morning the FTSE 100 rose 0.5 percent.
Fewer than fiver per cent of executives appointed by top companies in the past two years have been female, according to data compiled by BoardWatch.
Despite moves by the Government to encourage large companies to recruit more senior women, only four out of 87 chief executives appointed by the FTSE 100 companies in the past two years were female.
The FTSE 100 Index has closed 11.8 points higher at 5478.8 after reports that the US Federal Reserve, Bank of Japan and Bank of England were drawing up plans to cushion the blow of a Greek default.
The London market kept its head above water on hopes that central banks globally are ready to act if this weekend's election in Greece ultimately leads to the debt-laden country leaving the euro.
The pound was up against the euro at 1.23 as the single currency weakened ahead of Sunday's Greek poll, while sterling was also ahead against the US dollar at 1.56.
A downgrade of Spanish banks fuelled eurozone debt fears and capped the worst week for London's leading shares index for nine months.
The FTSE 100 Index was 70.8 points lower at 5267.6 after Moody's Investor Service cut the credit ratings of 16 Spanish lenders, including the UK arm of Banco Santander.
The downgrade, which hit bank shares in the UK, with Lloyds down 6%, came amid fears that the crisis will spread from Greece to Spain's beleaguered banking system.
The FTSE 100 Index fell 2%, or 110 points to 5465.5 after Greek President Karolos Papoulias was unable broker a deal as the anti-bailout party Radical Left Coalition party refused to join a coalition government.