Britain's blue-chip shares slumped 4.4 per cent this afternoon, dragged down by economically sensitive financials, with sentiment distressed by Wall Street's opening fall on yet more dismal earnings news.
Total market turnover was high at 1.3 billion shares ahead of the month and quarter end at today's close.
Further U.S. earnings gloom, this time from retailing giant Wal-Mart, rekindled fears over the outlook for company earnings and consumer spending.
Shares in insurers bore the brunt of selling pressure, with insurer Royal & Sun Alliance down 9.5 per cent as French reinsurer Scor became the latest in the sector to tap investors for funds.
Banks, viewed as vulnerable to bad debt problems arising from economic worries, accounted for most of the damage, taking 46 points off the FTSE 100, with Barclays down 6.7 per cent and Lloyds TSB off 5.9 per cent.
Oils wiped a further 33 points off the leading index, with BP and Shell both down over five percent as oil prices eased back from a sharply higher start, pausing after recent strong gains on concerns over rising tensions in the Middle East.