Across Europe markets slumped, with the FTSEurofirst 300 index of top European shares down 0.7 per cent in early trading.
It is on course to fall more than three per cent over the week, with high sovereign bond yields remaining a major focus for the market.
Spanish yields hit a euro-era high of 6.975 per cent at an auction yesterday.
The STOXX Europe 600 banking index fell 0.6 per cent, and has lost more than 36 per cent in 2011, as banks take writedowns on exposure to Eurozone peripheral debt.
The banking sector in London was the most significant loser, with Lloyds off by 2.9 per cent, Barclays 2.2 per cent and RBS 2.1 per cent.
Outsourcer Capita was the biggest faller, down four per cent after a market update in which it warned that clients were cutting budgets and that was having an impact on its sales.
iPhone chipmaker Arm Holdings dropped 3.6 per cent while miner Xstrata edged down 2.7 per cent.
Also in the mining sector Rio Tinto nudged down by 1.2 per cent and Anglo American 1.2 per cent as fears over global growth continued to cast a shadow.
Interdealer broker Tullett Prebon was down 0.7 per cent after it reported slowing revenue growth after having weathered market volatility in the summer relatively well.
There were few risers with InterContinental Hotels Group and National Grid - which gave a positive trading update yesterday - edging in the right direction.
In Asia the Nikkei closed down 1.2 per cent and the Hang Seng 1.7 per cent.
The MSCI world equity index was down 0.6 per cent, near its lowest levels since 20 October, and falling for a fourth consecutive day.