UK blue chips are plunging heavily, with the FTSE 100 index dropping over 200 points.
The dive has been attributed to vague market rumours that the collapse of banking giant Daiwa has led hefty selling of European equities by Japanese institutions, dealers say.
The FTSE 100 index is down 238.5 points, and now stands at 5,482.2.
Traders are worrying about a likely sharp reversal of yesterday's rally on Wall Street this afternoon.
Sharp falls from telecom and technology issues have put a big dent in market sentiment, with the sectors coming back under pressure and reversing opening gains on fears of an early tumble in New York today, and talk that Nokia could be set to issue a profit warning.
C&W was a major FTSE 100 casualty again, extending yesterday's losses in the wake of its shock profits alert, with brokers across the City turning more negative on the group. C&W shares dropped another 72p to 473p.
Other telecoms stocks to suffer include Energis, shedding 66½p at 307, Colt Telecom losing 118 at 940, and Telewest falling 6¾p to 122¾p.
Telecom heavyweights Vodafone and BT also stay dull after reversing opening gains. Vodafone dropped 10¾p to 188¾p, and BT shed 22p at 513p.
Among blue chip technology fallers, RISC-chip maker ARM Holdings dropped back after modest opening gains, losing 23½p at 302p, while Logica shed 104p to 1,238p, Sage Group fell 17½p to 272½p, and Marconi eased 29½p to 414p.
Elsewhere, banking issues suffered on the back of the Daiwa rumour, with Asian-based financials the worst off. Standard Chartered dropped 66p to 845p, and HSBC shed 57p at 808p.
Trafficmaster continued to top the FTSE 250 gainers list, adding 44½p to 270p after accompanying in-line full year results with news of a deal with Palm, the market leader in the handheld computer market.