The FTSE 100 Index saw its second major sell-off in as many days today as fears over the Eurozone reigned on global stock markets.
Worries over debt defaults by weaker European nations such as Greece and a potential tip back into recession have spooked markets as well as Germany's shock moves to defend the euro yesterday.
The Footsie shed 1.6% or 85 points to close at a three-month low of 5073.1 - wiping £21.8 billion off shares. The index tested the 5,000 mark at one stage before bouncing back.
London's fall comes on the back of a 2.8% fall on Wednesday amid declines which have seen the blue-chip index lose 13% of its value in the last month.
The falls were echoed on Wall Street where the Dow Jones Industrial Average shed more than 2%, while Germany's DAX and France's CAC 40 saw similar losses.
Other factors spooking markets included figures showing a sudden fall in Eurozone consumer confidence during May as well as a surprise rise in US unemployment benefit claims.
Manoj Ladwa, senior trader at ETX Capital, said: "The uncertainty over European sovereign debt, rising jobless claims in the US and economic growth concerns are all weighing heavily on the market."
The euro fell to 1.23 against the dollar after a brief revival, although it gained ground against the pound. Sterling traded below 1.43 against the greenback.
Traders also sold off metals and oil as worries over future demand grew.
"Fears of a double-dip recession are now starting to filter into the market's consciousness as a consequence of the problems in Europe," CMC Markets analyst Michael Hewson said.
In London just a handful of stocks finished the session in positive territory, with the heavyweight mining sector accounting for many leading fallers.
The biggest Footsie casualty was power transmission firm National Grid, which shed 7% after a surprise £3.2 billion cash-call on shareholders to fund investment in its network.Reuse content