LONDON'S top flight index fell to its lowest level for three years as sharp falls in banking stocks and fears over global growth continued to weigh heavy on the market.
The rout on the banks - which triggered a 2.7% plunge in Monday's session - continued apace as stocks in the UK's leading financial institutions came under pressure amid concerns over their ability to withstand a slowdown in the global economy.
The FTSE 100 Index dropped 1%, or 57.1 points, to 5632.1, losing early-session gains and delving to levels not seen since 2012.
The index has now fallen on 17 days out of the 27 trading days since the start of the year.
Elsewhere in Europe, Germany's DAX and the Cac 40 in France were both down more than 1%.
The falls followed a punishing session in Asia, where Japan's market sank 5.4% as it digested the potential threat of more global economic gloom.
Banking stocks took a hefty hit in the FTSE as fears intensified that a slowdown in the Chinese market, the falling price of oil and rock-bottom interest rates could steer the sector towards another meltdown.
Brent crude offered little cheer to the bleak global economic outlook as it fell 85 cents to 32 US dollars a barrel.
The pound was up a cent against the dollar at 1.44, while the pound was down a cent against the euro at 1.28.
It came as Britain's yawning trade gap grew to its highest level since 2010 following an £8.1 billion plunge in the export of goods.
The Office for National Statistics (ONS) said the deficit - the difference in value between UK imports and exports - widened by £300 million to £34.7 billion in 2015.
In stocks, Barclays was down 4.6%, or 7.6p, to 156.2p, Standard Chartered fell 5.5%, or 23.7p, to 403.3p, while Lloyds Banking Group dropped 2%, or 1.23p, to 58.1p.
London miners were also among the heavy fallers after a brief resurgence during the day, as Anglo American and Glencore were subject to price target cuts by Goldman Sachs.
Rio Tinto was down 4.8%, or 89.5p, to 1751p, Glencore dropped 8.1%, or 8.2p, to 94.6p, with Anglo American falling 11.2%, or 42.1p, to 333.9p.
Holiday operator TUI Group also saw its share price come under pressure as holidaymakers shunned Turkey in the face of terrorist attacks and continued fighting in Syria.
The company - which reported holidays to Turkey were down 40% - saw its share price drop 15p to 1083p.
Rival holiday firm Thomas Cook Group also saw shares drop 1.9p to 91.4p ahead of its update to the market on Thursday.
The biggest risers in the FTSE 100 Index were WPP up 3.3% or 45p to 1383p, Carnival rising 2.6% or 77p to 3034, Kingfisher up 1.8% or 5.9p to 320.6p, and Intercontinental Hotels Group up 2.2% or 50p to 2234p.
The biggest fallers in the FTSE 100 Index were Anglo American down 11.2% or 42.1p to 333.9p, Antofagasta down 9.3% or 42.5p to 410.9p, Glencore down 8.1% or 8.2p to 94.6p, and BHP Billiton down 5.8% or 41.4p to 666.1p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here