Fears over the global economic climate troubled traders today as European markets fell further into the red.
The FTSE 100 Index in London was more than 2% or 112.3 points lower at 5219.5, while the CAC-40 in France fell more than 2% and Germany’s Dax dropped 3%.
The latest slump was sparked by fears that China’s central bank is set to raise interest rates – a move that would hit demand in the world’s second largest economy.
But recent economic developments in Europe, such as weak GDP data in France and Germany, and in the US, following disappointing growth figures and a shock credit rating downgrade, continued to hit sentiment.
The heavily-weighted mining sector was hit worst by fears over China’s waning demand, with Anglo-Swiss miner Xstrata topping the fallers’ board, down 59.5p at 1022.5p. Elsewhere, copper miner Antofagasta dropped 53p at 1209p and Kazakhmys fell 44p to 1000p.
Global slowdown fears hit oil prices with Brent crude in London sliding nearly 1% to 109.61 US dollars a barrel.
Oil giant BP fell more than 2% or 9.2p to 403.8p, Royal Dutch Shell fell 22.5p to 1969.5p and Tullow Oil dropped more than 3% or 35p to 1035p.
A bleak sales outlook from computer maker Dell on Wall Street yesterday and a greater-than-expected slowdown in UK retail sales volumes hit the retail sector.
High street bellwether Marks & Spencer lost more than 1% or 5.2p at 334.5p, clothing giant Next fell 37p at 2205p and PC World owner Dixons Retail plunged nearly 5% to 12.4p.
The flight from risk saw traders plough into the safe haven investments of gold, which was up at 1,805 US dollars an ounce, and the US dollar itself, which was up against the pound and euro.
Elsewhere, shares in Argos and Homebase owner Home Retail Group were suffering after a downgrade to sell from broker Seymour Pierce.
Seymour analysts noted the gloomy retail outlook and said there were few self-help levers available to the company in order to reverse its fortunes. Shares were 5.1p lower at 128.1p, a drop of nearly 4%.
Online grocer Ocado declined another 5.8p to 118p amid ongoing fears about trading conditions and speculation that it will tap shareholders for cash to support its expansion.
In corporate news, shares in cinema operator Cineworld were 1% or 1.45p higher at 186.45p after it reported a drop in half-year profits but said it expected an improvement in trading over the rest of this year. Chief executive Stephen Wiener underlined his confidence with a 5.9% increase in the half-year dividend.