The benchmark index bounced off lows to close down 42 points at 5,918,
The sell-off followed big falls in US and Asian markets overnight as worries about prospects for the global economy continued and with oil prices remaining weak.
Tesco was a rare bright spot as its Christmas sales beat forecasts.
Shares in Tesco ended 6% higher after it said UK sales rose 1.3% on a like-for-like basis over the six weeks to 9 January, with chief executive Dave Lewis describing its performance as "strong".
In the wider market, investors continued to be rattled by falling commodity prices, with oil hitting fresh 12-year lows.
The price of Brent crude dropped to $29.73 a barrel at one point, but closed 0.7% higher at $30.48 a barrel.
Copper prices were also under pressure, with the price touching $4,330 a tonne - the lowest since May 2009.
In the FTSE 250, shares in Argos owner Home Retail Group rose 2.2%. In a trading update released on Thursday, Home Retail said its full-year profit was now set to be at the bottom end of expectations.
Late on Wednesday, the company had said it was in advanced talks to sell its Homebase DIY chain to Australia's Wesfarmers for Â£340m.
Shares in Restaurant Group, which operates chains such as Chiquito and Frankie & Benny's, dived nearly 18% after it said a tougher trading environment meant it was "more cautious than previously on the outlook for 2016".
On the currency markets, the pound was little changed against the dollar at $1.441, and was up a fifth of a euro centt against the euro at â‚¬1.3264.
(Close): The FTSE 100 closed 0.7% lower, but shares in Tesco jumped after it posted a rise in sales over Christmas.