A worldwide share plunge saw the FTSE 100 Index fall more than 100 points today as a run of pessimism on the markets pulled leading stocks further down from near-record heights seen just a few weeks ago.
The index of London's leading shares dipped below 6300 points as nervousness over the global economy prompted traders to cash in strong gains seen in recent months.
Analysts have observed that sell-offs in recent days are being spooked by the merest hint of negativity from the world's policymakers.
Just three weeks ago, the FTSE 100 soared to more than 6800 points, nearing the 6930.2 high seen during the dotcom boom in 1999. But it was soon being pointed out that the level of buoyancy was overdone given that, despite some optimism, economic conditions remain subdued.
The market looked due for a "correction" and began to fall, chiefly over fears that the US Federal Reserve's quantitative easing programme, seen as a stabilising crutch for the economy, would soon start to taper off.
It appeared to have levelled out last Friday after positive jobs data from the US. The "Goldilocks" reading suggested modest improvements in the outlook in America but not enough that the Fed would start to withdraw its massive stimulus.
The FTSE was flat yesterday and today traders around the world reacted badly to the latest update from the Bank of Japan, which had sent Toyo's Nikkei index down by 1 per cent overnight.
A statement issued by the Bank of Japan announced no major policy changes but reiterated its expectation for a moderate recovery in the coming months - at a time when analysts had been hoping policymakers would do more.
This afternoon, the FTSE 100 was down 1.6 per cent, or 105.1 points, at 6295.4. Germany's Dax and France's Cac 40 also fell close to 2 per cent.
Joshua Mahony, research analyst at Alpari, said: "Given the size and scope of this reaction, it is clear that investors have changed tack from one in which the default reaction is to buy to one in which every market event is analysed from a more sceptical point of view."