By Amal S
(Reuters) -London's FTSE 100 posted its biggest drop in three weeks on Thursday, weighed down by heavyweight financials and miners, while betting firm Entain rose on strong earnings and corporate updates.
The FTSE 100 ended down 1.7%, dragged by a 2.1% fall in major banks as they tracked weaker bond yields. Precious metal miners and homebuilders fell 1.1% and 3.3%, respectively.
"This big drop in bond yields is causing investors to take some risk off the table, because they don't quite know how to interpret it," said Andrea Cicione, head of strategy at TS Lombard.
"Until yesterday, while bond yields were falling equities were not, so the market was basically looking at these falling bond yields in a relatively positive way. But today, the positive sentiment is completely gone and the market is readjusting to these lower yields."
Entain, the owner of the Ladbrokes and Coral brands climbed 0.7% and was the second biggest gainer on the index after it reported an 11% rise in first-half net gaming revenue and said it was doubling investment in its game development studios.
The FTSE 100 has risen 8.8% so far this year, primarily led by gains in banks, materials and energy stocks. However, it has largely underperformed its developed market peers over risks arising from a rise in local coronavirus infections.
Homebuilder Persimmon Plc slipped 4.8% and was the third biggest decliner on the index, even after it reported higher half-year revenue and said it expected housing demand to remain robust.
Boosting hopes for airlines, transport secretary Grant Shapps said fully-vaccinated Britons returning from medium-risk amber list countries will no longer have to quarantine when they arrive home from July 19. British Airways owner IAG gained 0.3%.
The domestically focussed mid-cap index was down 1.4%.
Lloyds Banking Group fell 2.5%, after the bank was fined 91 million pounds ($125.25 million) by the Financial Conduct Authority for misleading insurance customers over an eight year period.
(Reporting by Shashank Nayar and Amal S in Bengaluru; Editing by Subhranshu Sahu, Kirsten Donovan)