LONDON'S top flight index dived to a fresh three-and-a-half year low, as mounting concerns over the state of the global economy showed no signs of abating.

The FTSE 100 Index plunged 2.4% or 135.3 points to 5536.9 - its lowest level since July 2012 - as the US Federal Reserve's warning over global growth, coupled with falling oil prices, weighed heavy on stocks.

The pessimism also seeped into the wider European markets with Germany's Dax down just under 3% and the Cac 40 in France dropping more than 3.5%.

UK stocks had enjoyed a brief respite on Wednesday, but stocks were back in the red on Thursday after the Fed warned over market volatility and said it could slow the pace of future US interest rate rises.

The Dow Jones was down just under 2%.

Connor Campbell, financial analyst at Spreadex, said markets are "caught in an ugly downward spiral led by the panic-ridden, and increasingly bloodless, banking sector".

Banking stocks were under fire again despite Wednesday's bounceback as fears remained over the sector's ability to withstand a slowdown in global growth.

Investor confidence was hit further after France's Societe Generale became the latest player to warn over profits.

It scrapped a long-standing earnings target for the year ahead, blaming a rise in regulatory capital requirements and "the economic and financial environment".

Soc Gen saw its share price dive 12%, while Credit Suisse and German giant Deutsche Bank were heavily in the red, down 8% and 5% respectively.

London-listed banks joined in the sell-off, with Barclays down 7%, or 11.2p, to 147.9p, Standard Chartered off 5%, or 20.7p, to 386.6p, while Royal Bank of Scotland dropped 4%, or 9.5p, to 223.5p.

The pound was slightly down against the dollar at 1.44, as the Federal Reserve chairwoman Janet Yellen said it was too early to tell whether the risks to global growth would alter its course on interest rates.

The pound was also down against the euro at 1.27.

Oil stocks also came under pressure as the price of oil fell more than 2% to 30.13 US dollars a barrel.

The price of oil has plunged by more than 70% since a peak in the summer of 2014.

BP fell 6%, or 19.8p, to 310.2p, while Royal Dutch Shell dropped 0.8%, or 12p, to 1445.5p and BG Group dipped 0.6%, or 6p, to 1020p.

Defensive stocks fared well in the rout, with gold and silver miners Fresnillo and Randgold Resources up 45p to 875p and up 430p to 6130p respectively in the rush to safe haven investments.

Elsewhere, holiday firm Thomas Cook was up 4p to 99.8p despite reporting that bookings were down 2% in "challenging" trading following the impact of recent terrorist attacks in popular tourist destinations.

Tobacco group Imperial Brands saw its share price rise as it bolstered revenues in the fourth quarter irrespective of a slowdown in Iraq and Syria.

Shares were up 1.9% or 69p to 3587.5p.

The biggest risers in the FTSE 100 Index were Rangold Resources up 430p to 6130p, Fresnillo up 45p to 875p, DCC up 215p to 5230p and Imperial Brands up 69p to 3587.5p

The biggest fallers in the FTSE 100 Index were Prudential down 88.5p to 1087p, Aberdeen Asset Management down 16.7p to 209.3p, Barclays down 11.2p to 147.9p and Glencore down 5.8p to 87.6p