The FTSE 100 plunged on opening today as a bleak view of the US economy from the Fed and fears over a slowdown in China - a key engine room in the global economy - took their toll.
London tracked hefty falls on Wall Street and in Asia with the Hang Seng in Hong Kong closing down five per cent, while 2.5 per cent was wiped off US blue chips.
The Fed unveiled fresh economic stimulus measures, branded Operation Twist by the financial markets, which will see it buy more long-term Treasury securities in an effort to lower borrowing rates.
But the move failed to impress investors worried over stuttering global economic growth, with data revealing that China's factory output had fallen for a third consecutive month.
Miners took a hammering on the FTSE 100 as the outlook for demand in commodities looked uncertain.
Kazakhmys was down almost eight per cent and was the biggest faller on the index.
Xstrata, Antofagasta, Rio Tinto and Lonmin plunged by more than six per cent in early trading.
Banks also saw their share prices dented with Lloyds and Barclays down more than four per cent.
Such was the dire state of the market that there were no notable risers on the index. RBS dipped by just over three per cent while HSBC lost two per cent.
SABMiller was down four per cent after yesterday announcing that the board of Foster's had accepted its bid for the company.
On the FTSE 250 TUI Travel was down six per cent despite a trading statement which said the company was on track thanks to a surge in late bookings.
Banks in the US struggled on Wall street yesterday after Moody's downgraded the credit ratings of Bank of America , Citigroup and Wells Fargo , driven by the conclusion that the government was less likely to provide support for a faltering bank.
Across the Atlantic later weekly US jobless claims figures will be the main focus.