The FTSE 100 crashed into the red on Tuesday as growing trade tensions and a weaker economic outlook weighed on markets around the globe.
The blue-chip index shed 120.17 points to close at 7,260.47, marking a 1.63% decline.
European markets were down across the board after the EU slashed growth forecasts for Germany for the second time this year.
The French Cac fell 1.7% and the German Dax was 1.58% lower.
“A couple of unpleasant revisions to the EU’s economic forecasts only added to Tuesday’s sense of unease, the markets crumbling under the renewed trade tensions,” said Connor Campbell, financial analyst at Spreadex.
Global stocks were down as sentiment remained fragile.
Fiona Cincotta, senior market analyst at City Index, said: “Trump’s threats to escalate the trade war with China is ensuring that risk aversion dominates and has put an abrupt end to the recent rally which saw the Nasdaq and the S&P reach fresh record highs.”
Oil prices were also hit by the gloomy mood, with a barrel of Brent crude oil trading 1.3% lower at 70.02 US dollars.
Meanwhile sterling was weaker, as cross-party Brexit talks between the government and opposition leaders reached “crunch time”, according to shadow Brexit secretary Keir Starmer.
The currency slipped 0.19% on the euro to 1.116 and was down 0.32% versus the dollar at 1.305.
In company news, Purplebricks founder and chief executive Michael Bruce left the online estate agent as the firm announced it will exit Australia and place its US operations under review.
It came just months after shares in the firm tumbled when it cut annual revenue guidance and announced the departure of the bosses of its UK and US units.
Shares slipped again on Tuesday, dropping 16p to 119p.
Shares in cash-strapped travel firm Thomas Cook jumped 1.33p to 23.01p after Lufthansa confirmed it has made a bid for Condor, the UK Group’s German airline arm.
Domino’s Pizza meanwhile warned that it saw a “disappointing” performance in its international business, with “weak” system sales across all its overseas markets – down 2% on a reported basis to £25.1 million overall in the division.
Shares dipped 3.8p to 257p.
Insurer Hiscox has said an increase in rates at its key businesses helped it post a rise in first-quarter income. Shares dropped by 8p to 1,620p after the group revealed gross written premiums growth of 3.3% in constant currency to 1.16 billion US dollars (£877.4 million) in the three months to March 31.
Shares in G4S tumbled after Canadian security firm Garda World Security walked away from a potential £3 billion bid for the British firm.
Garda revealed last month that it was in the preliminary stages of considering an approach to the board of G4S regarding a possible cash offer for all or part of the company.
Shares in G4S dropped by 6p to 210p.
The biggest risers on the FTSE 100 were Hikma Pharmaceuticals up 18p to 1,777.5p, SSE up 11p to 1,156p, Smith & Nephew up 13p to 1,582p, Intercontinental Hotels Group up 38.5p to 4,982.5p.
The biggest fallers on the FTSE 100 were Melrose Industries down 11.7p to 188.8p, Mondi down 66.5p to 1,641.5p, Royal Dutch Shell down 96p to 2,376.5p, and DS Smith down 14p to 348p.