Recession fears came to the fore today to undo the rally in London shares, pushing the FTSE 100 index down more than 7 per cent.
More grim news on the economy, including a rapid raise in unemployment figures, sparked fears for investors that Government action would not be enough to avoid a long-term recession - leaving the blue-chip shares to close 314.6 points lower at 4079.6.
Stock markets across across Europe also closed heavily down, with France's CAC 40 and the Dax in Germany also down by 7 per cent.
Wall Street's Dow Jones Industrial Average - hit yesterday by profit-taking - fell by nearly 4 per cent in early trading after poor economic data reinforced fears of a global recession.
The declines come after a recent rebound on optimism over global banking bail-outs.
In London, the downbeat economic sentiment was not helped after UK unemployment jumped at its fastest rate in 17 years during the three months to August.
Heavyweight commodity stocks were also weighed down by falling oil and metal prices, which compounded the Footsie's falls.
Miners dominated the blue-chip fallers board after metal prices plunged on demand concerns in a worsening economic outlook, leaving Eurasian Natural Resources down 25 per cent, or 130p at 386.5p.
The stock was closely followed by Kazakhmys down 96.5p at 336.75p and Anglo American off 334p at 1326p as brokers at Bernstein marked down the sector on weakening demand.
The fears also sent crude oil for November delivery down as low as 74.57 US dollars a barrel - a level not seen since last September - as oil cartel OPEC also scaled back its estimates for global demand in 2009.
This hit BP, off 32.5p at 414.25p, with Royal Dutch Shell down 104p to 1347p. Elsewhere in the sector, prospector Tullow Oil lost 56p to 503p while oil and gas services firm Wood Group was 35.25p worse off at 225p.
Attention was focused on the banking sector after reports the Treasury was under pressure to rework its £37 billion bail-out, in particular to allow some dividend income for investors.
Lloyds TSB and HBOS have been under pressure since the rescue, but the possibility of investor payouts helped lift sentiment. Lloyds was one of the least impacted by today's wider market falls, down 1.1p at 150.2p and HBOS stemmed recent falls to rise 0.4p to 85.7p.
In corporate news, software group Autonomy was another blue chip to be largely shielded by the sell-off after third-quarter results at the top end of market hopes. Its share falls were limited to 9.5p, at 808.5p.
Elsewhere, pubs chain Marston's shed 5p to 112p - a fall of 4 per cent - as the group reported subdued sales and rising costs.
But online gaming site Sportingbet lifted 7 per cent or 2p to 29p as it said demand remained strong, despite the weaker economic conditions.
The two Footsie risers were Thomas Cook Group up 2.2p at 189.2p and HBOS, 0.4p higher at 85.7p.
The biggest Footsie fallers were Eurasian Natural Resources down 130p at 386.5p, Kazakhmys off 96.5p at 336.75p, Anglo American down 334p at 1326p and Old Mutual down 14p at 63.3p.Reuse content