Fresh gloom over the US economy and fears among retailers over Christmas trading saw London's blue chips slump nearly 2% today.
The FTSE 100 Index fell 119.2 points to 6277.8 after early losses on Wall Street amid warnings from former US Federal Reserve chairman Alan Greenspan over rising inflation and slowing economic growth.
Weekend reports of heavy discounting among high street retailers and downbeat analyst comments over prospects for the crucial festive season also hit the sector.
The Footsie began the session on the back foot and never recovered after inflation fears sent US markets plunging late on Friday, sending tremors through Asian markets overnight and through Europe today.
Investors in the US are concerned inflationary pressures could derail further interest rate cuts. This caused the Dow Jones Industrial Average to slide by more than 1% ahead of the weekend.
Retailers were worse hit in the wider market gloom amid signs of disappointing pre-Christmas trading on the high street.
Seymour Pierce stockbrokers added to the concerns by warning that fashion retailers and big-ticket firms were most at risk of the slowdown.
Argos owner Home Retail Group slid sliding almost 6%, or 19p to 311p. Next dipped 75p to 1602p and Currys owner DSG International fell 3.9p to 100p.
Marks & Spencer was off 21p to 548.5p, while department store chain Debenhams was on the back foot in the FTSE 250 Index, off 5.75p to 75.5p.
Elsewhere Doctor Who toy distributor Character suffered hefty losses after becoming the latest listed retailer to warn on profits in an "unusually difficult" trading environment. This sent its shares down more than 50%, or 69.5p, to 68.5p.
Among the few top flight risers, cruise group Carnival sailed ahead as analysts looked to strong full-year figures from the group despite rising fuel costs. Shares gave back earlier gains, but finished 3p up at 2189p.
The leading riser was Lambert & Butler maker Imperial Tobacco, as nervous investors fled for safety into the traditionally defensive sector. Shares were up 42p, or nearly 2%, to 2619p, while British American Tobacco gained 25p to 1927p.
At the opposite end of the spectrum, the world's biggest drinks can maker Rexam was the biggest faller. The company fell more than 6%, or 27p, to 397p after a Citigroup downgrade following last week's profits warning.
Insurer Standard Life was another top flight faller, down 9p to 249p, after HSBC initiated coverage of the stock with a 300p target. It said it saw better value in the UK with Legal & General and Prudential.
Elsewhere Photo-Me International shares tumbled nearly 8% after the photo booth firm reported lower first half profits and said it was unlikely to make a surplus in the second half. Shares fell 3p to 36p.
The leading Footsie risers were Imperial Tobacco, up 42p to 2619p, BAE Systems ahead 7p to 462p, Tate & Lyle up 6p at 430.25p and British American Tobacco ahead 25p at 1927p.
The leading Footsie fallers were Rexam, off 27p at 397p, Home Retail Group down 19p at 311p, British Airways off 17.75p at 302.5p and Irish firm Tullow Oil, which fell 36p to 646.5p