Wiktor Bielski, a Morgan Stanley analyst, who has previously been bullish about the sector and a "total believer in decoupling and the supercycle", called for a 10-to-20 per cent short-term correction, "given out-performance, valuation and stocks data". Mr Bielski said that while his long-term view had not changed, in the shorter term the whole sector was vulnerable.
By the close, BHP Billiton was down 7.88 per cent or 173p at 2,023p, claiming first place on the FTSE 100 loser board. Kazakhmys was down 151p at 1,792p, Rio Tinto lost 485p to 6,583p, Anglo American was down 277p at 3,453p and Xstrata was weaker by 263p at 4,157p.
Vedanta Resources, which led the FTSE 100 on Monday, was down 143p at 2,637p.
Overall, the FTSE 100 fell 184.9, or 2.9 per cent, to 6,191.6. The weakness of mining stocks was supplemented by early losses on Wall Street, where investor sentiment was dampened by yet another increase in the price of oil and by a US Labour Department report, which said that wholesale inflation increased by 0.2 per cent in April.
The FTSE 250 was down 307 points at 10,250.3.
On the FTSE 100, only three stocks were up at the end of play – British Land climbed by 8.5p to 796.5p after posting better-than-expected full-year numbers, while Alliance & Leicester gained 4.25p to hit 434.5p and HBOS added 2.75p to reach 465.25p after reports indicated that one of the two might be targeted by Barclays, which is said to be considering a takeover in Britain or the US. Barclays was down 7.5p at 405.5p after UBS said the bank might yet raise capital.
"The recent acquisition of Expobank and ongoing organic expansion indicates that Barclays does not believe it is currently capital constrained," UBS said. However, it added: "While Barclays may not have to raise capital, we see an increasing chance it may choose to do so ... We maintain a 'buy' rating believing the possibility of a capital increase is already largely reflected in the share price."
Beyond the banking sector, Imperial Tobacco was down 163p at 2,455p after launching a deeply discounted £4.9bn rights issue to pay for last year's acquisition of the Spanish cigar-maker Altadis.
On the FTSE 250, media companies were weak after Goldman Sachs reduced its target prices for leading stocks. "Our expectation was for [first quarter] results to exhibit resilience across the major advertising markets, with pressures building in [the second quarter]," it said in a note.
"Actual [first quarter] results have been mixed, and UK regional press advertising is declining even more rapidly than we had forecast, as highlighted by Johnston Press and Trinity Mirror."
Goldman downgraded Johnston Press, which was down 6p to 118.5p, to "neutral" from "buy", cutting its target price for the stock to 121p from 223p. Daily Mail & General Trust, which lost 21.75p to close at 417p, was also moved to "neutral" with a new target price of 404p, while Trinity Mirror was down 12p at 241.75p.
Yell was the worst off on the mid-cap index – the stock slumped by a spectacular 26.32 per cent or 55p to 154p after the company published its results and halved its final dividend to "enhance financial flexibility".
"Predictably, the macro environment weighs on Yell in all markets," said Panmure Gordon, adding: "Like Informa, Yell has rallied in recent weeks.
"However, there are few positive catalysts in the statement beyond cost cutting. Therefore, near term we would expect some profit taking again."
On the upside, the financial betting specialist IG was up after Merrill Lynch upgraded the stock to "buy" from "neutral".
"IG has been a net beneficiary of the prolonged market volatility and has also made an encouraging start to its new European operations," the broker said.
"We think the company is now looking a lot cheaper whilst the supportive market backdrop continues to drive strong growth in client recruitment and trading activity."
IG was up 4.32 per cent or 16p at 386p, claiming third place on the FTSE 250.
On the AIM market, Borders & Southern Petroleum, the Falklands Islands-focused oil and gas explorer, was up 6.25p at 101.5p after Panmure Gordon initiated coverage on the stock with a "buy" rating.
"High oil prices and a decreasing number of global exploration opportunities have led to growing industry interest in the Falkland Islands," Panmure said, adding: "We believe that sentiment is likely to remain highly positive into 2009, as a busy drilling schedule materialises."
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