By Toni Vorobyova
LONDON (Reuters) - The FTSE 100 slid from 13-year peaks on Thursday, battered by weak Chinese economic data and signs the U.S. Federal Reserve could soon taper its stimulus programme.
Mining stocks slumped after data showed factory activity in China, the world's top metals consumer, shrank for the first time in seven months in May.
Also pressuring equities, Fed chairman Ben Bernanke said late on Wednesday the central bank could scale back quantitative easing in coming months if economic momentum was maintained, thus threatening the removal of the stimulus which has been a key driver of the year-long equity market rally.
The FTSE 100 was down 132.32 points, or 1.9 percent, at 6,707.95 by 1027 GMT, retreating from Wednesday's 13-year peak of 6,875.62 and on track for its worst day since last July.
"Lots of people have bought into the QE argument … and doubts have crept in as to when he (Bernanke) is going to turn the tap off," said Andrew Feldhaus, investment manager at Redmayne Bentley.
"We have seen a very good run over the last trading session and, once you get a run like that, inevitably people are going to start thinking too far too fast ... My feeling is that you would need to see several hundred points off the index before you can think about putting money in again."
The 6,700 mark - a psychological level, which broadly coincides with the peak from May 15 and is just below the 10-day moving average - acted as a floor for the index. Technical analysts said a break below that could lead to steeper falls.
"If the selling pressures really take hold we could even see a drop to 6,550 or so," said Bill McNamara, analyst at Charles Stanley. That would see the index 5 percent below its peaks.
In a sign of increased caution, implied volatility on the FTSE 100 - which reflects options prices jumped 18.8 percent, its biggest rise in nearly four months.
The reduced appetite for risk was reflected in investors' search for companies with strong dividends. United Utilities was one of the few gainers, up 1 percent, after unveiling in-line full-year results and increasing its dividend.
Meanwhile mid-cap bicycles-to-car-parts group Halfords paid for slashing its dividend to fund a three-year sales push, sending shares down more than 14 percent.(Additional reporting by Tricia Wright; editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)
The new magazine for a new generation of West Australians.Click here to download »
All the latest market figures from Australia and the world.Click here »
'The West Australian' is a trademark of West Australian Newspapers Limited 2013.
All rights reserved.
Select your state to see news for your area.