The late sell-off on Monday afternoon that wiped more than 100 points off the FTSE 100 followed through into yesterday with all the main FTSE indices taking further severe punishment.
The FTSE 100 came under heavy fire from the outset, burdened by US interest rate worries which mingled with London's own concerns about domestic interest rates.
After a session of relentless weakness, the index was left 105.7, or 1.6 per cent, down at 6,274.1.
At its worst, when Wall Street had fallen back into negative territory, the 100 index was down 116.9 at 6,262.9. The Dow Jones Industrial Average saw an early 71-point gain transformed into a 65-point loss after London closed for the day.
Alarm bells were also clanging around the rest of the market, which registered its continuing unease about the recent strength of sterling. Sterling recently reached its highest level for 14 years measured by the Bank of England's exchange rate index.
The FTSE 250, heavily represented by engineering and export stocks, dropped 100.4, or 1.6 per cent, to 6,277.9, having dipped to a session low of 6,274.4, while the FTSE SmallCap lost 52.9, or 1.6 per cent, off at 3,180.6.
London's performance came as no real surprise to the market after Wall Street's sharp reversal on Monday night, which saw the Dow Jones Industrial Average give up an early three-figure rise and plummet more than 300 points before finishing 243 points, or 2.2 per cent, lower.
The hi-tech heavy Nasdaq Composite fared even worse, sliding 3.3 per cent.
It was the same old story behind Wall Street's weakness, the threat of rising interest rates after next Tuesday's meeting of the US Federal Reserve's open market committee.
Dealers were not shocked at the day's events, pointing out that there had had been expectations of difficult times for the stock market ahead of a long list of economic news from Britain and the US.
The December inflation report, which showed marginally higher than expected inflation over the month, caused few problems for a market already on the back foot.
Dealers said the market would look very carefully at the minutes of the January 13th meeting of the Bank of England's monetary policy committee, after which domestic interest rates were increased by 25 basis points, to see how many of its members had voted for a 50-basis points increase.
Turnover in equities was 1.85 billion shares.
