Commodity stocks, sensitive to data showing a stuttering recovery, were the biggest fallers by some margin, led by Vedanta Resources, down more than 13 per cent, as metal and crude prices tumbled.
Markets were fearful over future demand as a gloomy statement from the Fed was compounded by data showing more evidence of a slowdown in top commodity consumer China.
HSBC’s China Flash PMI survey showed factory output fell for a third consecutive month in September.
After the Fed said the economy faced “significant downside risks”, a G20 meeting in Washington this week will be watched for any further policy response in tackling the global slowdown and euro zone debt crisis.
The FTSE 100 slid 246.80 points, or 4.7 per cent, to 5,041.61, hitting a five-week closing low and registering its biggest one-day percentage fall since early March 2009.
The UK benchmark saw £64bn wiped off its value yesterday.
There were no blue-chip gainers, while the FTSE 100 volatility index jumped nearly 17 per cent – evidence that nervousness is growing.