The FTSE 100 index <.FTSE> closed down 1.2 percent at 6,776.95 points, with the losses accelerating after U.S. markets opened, and dropped 1.7 percent for the week. The decline was bigger than the losses after Britain voted to leave the European Union.

On Thursday, the ECB kept rates on hold and, while maintaining the timetable for the bank's quantitative easing programme, President Mario Draghi said that a possible extension of the programme had not been discussed, sending European markets lower.

Wall Street opened sharply lower after one usually dovish Fed official warned of the risks of not raising rates soon. Some also cited heightened geopolitical tensions after North Korea completed a nuclear test as dampening appetite.

The falls were broad-based, with all sectors bar one in negative territory. Growth-sensitive stocks such as consumer goods were especially hit.

However, banks rose, with Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) up 2.3 percent and Barclays (>> Barclays PLC) up 0.9 percent. Analysts said that Draghi's lack of an indication for any further rate cuts had been taken as a positive by investors.

"These lower interest rates are really damaging the banks," said Jonathan Roy, advisory investment manager at Charles Hanover Investments.

"Whereas there has been a continual cutting in rates over the last 18 months, which has been really damaging for core banking profitability ratios, it signalled yesterday that there might be a plateau now in deterioration of those ratios, which is being taken as a positive for the banks currently."

Broker downgrades weighed on Bunzl (>> Bunzl plc), which dropped 3.4 percent after HSBC cut its rating on the stock to "hold", citing macro uncertainty, and Burberry (>> Burberry Group plc), which fell 2.5 percent after Goldman Sachs removed the luxury goods stock from its Sustain Focus List.

"Over the last two years (FY14-16), Burberry has seen weaker than expected financial performance," Goldman said in a note.

"The key drivers of this deterioration have been subdued sales growth and increasing costs associated with the company’s strategic investments ... We are concerned that these headwinds continue."

Outside of the blue chips, pub chain operator J.D. Wetherspoon (>> J D Wetherspoon plc) rose 2.4 percent after reporting better-than-expected results.

Peer Greene King (>> Greene King plc), however, dropped 6 percent after reporting a slowdown in like-for-like sales growth and saying that trading could get tougher as a result of Brexit.

(Editing by Larry King)

By Kit Rees and Alistair Smout