The FTSE 100 dropped today (Tuesday) led by falls in risk sensitive assets such as banks and commodity stocks as fears intensified over the sustainability of the global recovery.
The index shed 61.37 points, or 1.2 per cent at 5,140.19, erasing the 0.9 per cent gain on Friday, as traders returned after the Bank Holiday break.
Concerns about the pace of economic recovery dented investor sentiment.
Wall Street .DJI slid 1.3 percent as a statement from President Barack Obama fell short of addressing worries the recovery is faltering, while investors looked ahead with caution to important economic data coming this week.
Tokyo stocks shed 3.6 per cent, their worst daily drop in three months, after the Bank of Japan's emergency moves the day before failed to curb the yen's strength and disheartened investors bailed out of the market.
"There has been a concern for some time now that central banks have been running out of ammunition in term of ways of being able to stimulate the economy," Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers said.
In London, the banking sector led on the slide, with Barclays off three per cent.
Weakness was also seen in energy and mining stocks, which fell in tandem with commodity prices as the outlook for global demand clouded over.
Outsourcing company Serco was a top faller, down 2.9 per cent as BofA Merrill Lynch cut its rating to "neutral" from "buy" ahead of the UK spending review in October
City A.M. Reporter