The FT-SE 100 index tumbled 43.1 points to 3,514.8. It was the biggest fall since John Redwood mounted his surprise challenge to John Major in June. At one time the index was down 54.3.
Trading in the cash market was not heavy with futures influences taking their toll. But the weakness of the US dollar, the poor UK trade figures, uncertain government stocks and more shivers in New York left many market men with the impression it could be time to run for cover.
Although London has lagged behind New York Footsie stretched to a new peak last week and then seemed strong enough to move further ahead.
But a week is a long time in the stock market and there has been a distinct weakening of enthusiasm in recent sessions.
The mood has not been helped by indications the economy is slowing, interest rates are unlikely to fall and the evident constraints the Chancellor is facing over his November Budget.
The sudden outbreak of nerves pulled Footsie back to its lowest since the start of the month.
Shares with US connections were obvious casualties. British Airways fell 11p to 437p; Guinness 9.5p to 520.5p; Reuters 11p to 563p and Vodafone 10.5p to 265.5.
Zeneca was one blue chip to buck the trend. It gained 7p to 1,121p on hopes about the potential of its cancer drug. Most other drug shares gave ground, although Cortecs International rose 3p to a 101p peak as two institutional investors said they had increased their shareholdings.
Stanford Rook, preparing a treatment for tuberculosis, gained 10p to 168p following investment presentations.
Asda, the supermarket group, had a bumpy session as rumours resurfaced that Archie Norman, the chief executive responsible for revitalising the once-ailing chain, planned to quit and move into politics. It was suggested he intended to put himself forward as a Tory candidate for the Vale of York constituency. On such a ragged day an Asda denial had little impact, leaving the shares 3p down at 101.5p.
The possibility National Westminster Bank could use the proceeds of any US disposal to increase its financial presence in London provided a few blue spots. Schroders and Mercury Asset Management were firm although the pounds 53m cash call clipped Close Brothers 22p to 309p.
Speculation of a German bid lifted Lucas Industries 5p to 191p and Lonrho added 0.5p to 168p on unbundling speculation.
Eurotunnel continued to fall deeper into its investment hole with the shares crashing 11p to a new low of 98p. Turnover was printed at 2.1 million. It is estimated that around 75 per cent of the group's capital is held by French investors.
Eurocopy recovered 6p to 97p as the office equipment group said talks continued that could lead to an offer. Cyril Gay, chairman, and his friends control the group. The shares touched 104p earlier this month.
Enviromed, the struggling healthcare group, fell 3p to 28p as bid talks were called off. The company has been involved in discussions with various parties, including representatives of its own management, for more than three months.
BCE, the computer games business reporting figures on Friday, held at 19.75p and Golden Rose Communications stuck at 86p against a March flotation of 135p. The radio group, with jazz and the all-women Viva stations, has appointed Richard Wheatley as chief executive, replacing David Maker. GRC, which lost pounds 670,000 last year and pounds 986,000 in the first half of this year, is thought to be seeking further radio outlets.
Queens Moat Houses, the struggling hotel group, fell 0.75p to 9.25p in brisk trading. When it announced results on Thursday the shares jumped 3.5p to 11.75p as some took the view the swing back into profits heralded happier days.
But the company, once on the verge of joining Footsie, still faces a long, hard struggle and there is little prospect of realistic profits for some years.
Trafalgar House, buying in pounds 150,000 loan stock, gained 2p to 34.5p. Engineer Siebe ran into profit-taking after recent presentations, losing 17p at 723p.
Losses left builder John Mowlem off 5p at 64p and a profit warning from fuel group Greenway lopped 30p off the shares at 108p. Alpha Airports dropped 20p to 109p.Reuse content