London's leading shares index saw its biggest fall in nearly three years today as panic over the state of the global economy took hold.
The FTSE 100 Index closed 4.7% or 246.8 points lower at 5041.6 - wiping £64 billion from the value of Britain's biggest companies.
The slump - the biggest points fall since November 2008 - came after America's central bank delivered a gloomy view of the economy and failed to inspire traders with its latest emergency measures, which included a process dubbed Operation Twist.
The US Federal Reserve's warning that there were "significant" risks to the world's biggest economy was joined by disappointing manufacturing figures from Asian powerhouse China and the eurozone.
Meanwhile, Britain joined forces with five other G20 countries to call for decisive and co-ordinated action from the world's leading nations to help the global economy recover from recession.
Ben Critchley, sales trader at IG Index, said: "Last night's gloomy outlook from the Fed saw market sentiment take a battering right from the open, while disappointing figures from China have done little to lighten the mood."
Operation Twist, designed to keep US interest rates lower for longer, disappointed markets, which had surged in recent days on hopes that the Fed might embark on a third package of quantitative easing.
The Dax in Germany dropped 5% while France's CAC-40 fell 5.3% as a similarly shocking performance unfolded on Wall Street, where the Dow Jones Industrial Average was 3.6% lower.
Oil prices tumbled on global growth fears, with Brent crude in London dropping nearly 3% to 105.71 US dollars a barrel and light crude on the New York Mercantile Exchange off 5.4% to 81.22 US dollars a barrel.
The grim outlook from the Fed - which pointed to weakness in the US labour and housing market - was the latest shock to already volatile global markets, most recently shaken by financial uncertainty in Greece, which is verging on a debt default.
As the markets slumped, Prime Minister David Cameron put his name to a letter calling for swift action to resolve the eurozone debt crisis and to put America's public finances on a sustainable path.
Elsewhere, managing director of the International Monetary Fund (IMF) Christine Lagarde urged nations to work together to meet the growing risks.
Miners and bankers were the biggest losers amid growing fears for the health of the global economy after the IMF earlier this week warned that the world was entering a dangerous phase.
Fears of a slump in demand for mineral resources saw declines for Vedanta Resources, Kazakhmys and Antofagasta which all lost nearly 13% of their value.
Weak sentiment towards the banking sector was aggravated yesterday when agency Moody's downgraded credit ratings for three major US banks - Bank of America, Wells Fargo, and Citigroup.
Barclays was down 9%, Lloyds Banking Group was off 10% and Royal Bank of Scotland dropped 1%.
Some economists still expect the Fed to roll out so-called QE3 as early as November - which would boost asset prices around the globe by pumping more money into the financial system.
Operation Twist - which will see short-term government loans sold in favour of notes that expire over a longer period - was met with scepticism about whether it will be as effective. The last time such a tactic was adopted, in 1961, it only lowered rates by 0.15%.
Interest rates in the US are already at a record low yet the economy is still struggling to grow.
Clem Chambers, chief executive of European stocks and market website ADVFN, said today had been a perfect storm for a market slump.
He said: "The markets may bounce back, but unless the governments of Europe find a solution fast the FTSE will find itself heading quickly towards 4500, on its way to 4000 and perhaps beyond.