The UK’s main index suffered its biggest daily drop since 2009 as it fell away from the 6,000 mark for the first time in more than two years.
On what some are calling ‘Black Monday’ the FTSE 100 was hit to the tune of £80bn today as investors fled from risk.
"The volatility index has now doubled in less than three trading days and this is a clear example that panic rather than prudence is driving traders’ thinking," claimed Alastair McCaig, at spread betting firm IG.
Investors followed a sell-off in China, which saw the Shanghai Composite register its biggest one-day loss for more than eight years, down 8.5% to 3,210.
Markets across the world continued the sell-off trend, particularly in Europe where the German Dax was 4.6% lower while the French Cac40 lost 5.4%.
Across the pond, US stocks joined in the misery party. Of the three main US benchmarks, the tech-laced Nasdaq Composite was hardest hit in the first hour of trading, tumbling 3.4% to 4,546.
The S&P 500 was off 3.1% at 1,909 while the Dow Jones average, although down 2.8% at 15,998, was showing signs of having hit bottom and bouncing back a little.
Connor Campbell at spread-betting firm Spreadex said: “As expected the US open brought with it a tsunami of selling, with the Dow Jones hurtling to a 1000 point drop in the first few minutes of the session.
“The US markets soon stabilised, but the Dow still fell below 16000 for the first time in nearly 18 month, and at points has threatened to post the worst one-day decline in its history.”
Back in the UK, the FTSE 100 ended 4.67% lower, 288 points, at 5,898 with only one company managing to eke out a gain.
The sole riser on the FTSE 100 was RSA Insurance (LON:RSA) after talks with Zurich progressed well over the weekend, with a deal likely to value the company at £5bn.
Time is running out for a deal to be done before tomorrow’s deadline and Zurich has asked for an extension. Shares in RSA rose 3.7p to 495p.
The dramatic sell-off in China hurt the miners as a slowdown in the world’s second largest economy would affect the demand for metal.
Platinum eased 3% to US$988 and silver lost 2.17% to US$15.02.
As a result platinum miner Anglo American (LON:AAL) dropped 8.53% to 670p while silver miner Fresnillo (LON:FRES) eased 5% to 647p. Copper miner Glencore (LON:GLEN) was the biggest faller of the day, plummeting 9.9% to 142p.
On the FTSE 250, with Brent Crude and West Texas Intermediate dropping 5.9% and 5.5% respectively, Premier Oil (LON:PMO) was the biggest faller, losing 13.9% to 88.8p, while Tullow Oil (LON:TLW) lost 10.59% to 181p.
In small caps, Geong International (LON:GNG) confirmed it is in preliminary discussions regarding a possible offer for Geong by Hanafin. Shares rocketed 78.6% to 4p.
African Potash (LON:AFPO) was the biggest gainer of the day as it signed its first memorandum of understanding (MoU) with a Zambian fertiliser supply company.
Shares skyrocketed 80% to 1.89p after it announced the first supply deal following the landmark agreement struck earlier this month with Comesa - the free trade union of 20 African countries.