The slump wiped pounds 27.56bn off UK stock market values with Foostie losing pounds 24.3bn alone. The biggest losers were exporters due to the continued strength of sterling boosted by last week's interest rate rise.
Companies with Far East links also suffered. Fallers included British Steel, Billiton and Rolls Royce. Asda bucked the trend helped by strong market share gains.
Richard Jeffrey, group economist at Charterhouse Bank said: "The Far East has porobably set the underlying tone with Hong Kong falling nearly 500 points over two days.
"There are some worries about the growth implied in the US figures and whether that might lead to higher rates.
"And there is also a general concern about precisely what is going on in the UK at the moment."
The pound put edged up to 1.629 against the dollar against the previous day's 1.628 close. The Yen dropped sharply to 143.65 against the dollar against the previous day's figure of 141.3.