The 156.78-point fall in the Dow Jones Industrial Average, took the index down to 8,031.22 and could force the FTSE below the 5,000 barrier.
The Dow's tumble had already knocked 55 points off the blue chip index when London closed on Friday, as financial and pharmaceutical stocks, which have led Footsie's rally, fell back and second-line stocks picked up the running.
The leading 100 index eventually closed at 5,031.3, having slithered within a whisker of 5,000 at one stage.
With only a handful of large companies reporting this week as the holiday season gets into full swing, dealers are expecting markets to be sensitive to currency movements and a host of economic data.
Several industrial groups such as Glynwed, the engineering conglomerate, BICC the cables group, BOC, the industrial gases company, are all expected to report results affected by the strength of sterling.
Producer prices figures for July, due for release today are expected to show a 0.1 per cent increase on June and a 1.1 per cent increase year on year.
Motoring costs are likely to rise by 0.4 per cent a month and 5.7 per cent year on year. However, on the high street, prices will be lower as the summer sales get under way. Clothing and footwear and seasonal food will see the largest decreases.
In June, a 5 per cent increase in seasonal food prices, the product of the wet weather, was an important contributor to the overall increase in June.
Retail prices for July, due tomorrow, will show the Budget's impact on petrol duties and the effects of higher mortgage costs. The two factors are expected to take headline inflation to 3.2 per cent year on year with July's figure 0.1 per cent lower than June's.