Miners and banks led the FTSE down in early trading as investors shunned riskier assets and ran for cover as global economic growth stutters.
The fall tracked losses on Wall Street yesterday and Asia overnight despite an initial boost after China cut its interest rates in an attempt to accelerate its growth.
But US Federal Reserve Chairman Ben Bernanke soured sentiment as he showed reluctance to give fresh stimulus now to the world's largest economy.
The downgrading of Spain's credit rating by two notches added to the grim picture.
Miner Vedanta was the biggest faller on the blue chip index, down more than five per cent. Rio Tinto and Kazakhmys were both off by more than four per cent, while BHP Billiton lost 3.2 per cent.
Meanwhile RBS and Barclays both nudged down by around four per cent.
Utility companies dominated the gainers in London, although rises were modest. Severn Trent was up 0.8 per cent, United Utilities 0.6 per cent and National Grid 0.5 per cent.
Primark owner Associated British Foods enjoyed a lift of 0.7 per cent and pharmaceutical giant GlaxoSmithKline 0.7 per cent.
BSkyB was up 0.5 per cent as JPMorgan raised its target price on the satellite broadcaster to 850 pence from 790 pence.
In positive retail news John Lewis said weekly department store sales were up 18.1 per cent.
Meanwhile M&S said it would next month introduce in-store banks in partnership with HSBC.
On the FTSE-All-Share Gulf-based oil rig maker Lamprell slumped 32 per cent after the firm cut its 2012 forecasts again, just three weeks after a profit warning that sliced its shares in half.
In Asia the Nikkei closed down two per cent and the Hang Seng 0.9 per cent.