MOUNTING Brexit fears have hammered the pound and sent the London market into meltdown, with the top-flight index tumbling below the 6000 barrier for the first time in nearly four months.

The FTSE 100 Index was down 2% or 121.44 points to 5,923.53, while Sterling, which hit two-month lows against the US dollar and euro on Monday, dropped by 0.8% to 1.41 dollars.

Three opinion polls on the referendum on EU membership have put the Leave campaign in the lead, while The Sun newspaper also came out in favour of Brexit.

Lower-than-expected inflation figures also did little to support sterling, with the Consumer Prices Index unchanged at 0.3% in May against forecasts for a rise to 0.4%. The pound made a marginal 0.1% rise against the euro at 1.26.

The wider market falls were compounded by sliding oil prices, with benchmark London Brent crude 1.3% lower at 49.70 US dollars as a report pointed to an increase in US shale production next year.

With this week's US interest rate decision also in sharp focus, the Dow Jones was down 0.66%, while the Cac 40 in France sank by 2.17% and Germany's Dax fell 1.28%.

In stocks, heavyweight financial firms sank deep into the red as investors took fright amid fears of slowing global growth and a British exit from the EU.

Barclays was under pressure after a report from analysts at Jefferies suggested it was the UK bank that would be hit hardest by a vote to leave the EU, sending shares down more than 3%, off 5.1p to 160.1p

The lender is thought to be the most exposed through investment and corporate banking.

Worldpay slipped 8.9p to 265.9p, while Lloyds Banking Group was 2.1p lower at 62.2p.

Housebuilders were also in the red, despite Crest Nicholson brushing aside concerns over the EU referendum and posting a 25% rise in pre-tax profits to £72.6 million for the first half of the year.

It said while there would be a risk of "disruption" following a Brexit vote, there was still strong demand from house buyers.

Shares in Crest fell 7% or 39.5p to 520.5p in the FTSE 250 Index, while its top tier rivals were also heavily lower.

Berkeley was 4% or 130p down at 2990p, Barratt Developments fell 20p to 516.5p and Taylor Wimpey was 6.6p lower at 173.1p.

Elsewhere, transport giant FirstGroup surged 6% ahead in the second tier - up 6.2p to 109.3p - as it predicted a year of "strong progress" after a tough past financial year, when it was hit by the loss of rail franchises.

The Aberdeen-based group reported a 1% fall in underlying earnings to £300.7 million for the year to March 31, with revenues dropping by 13.8% after losing key rail franchises, while its First Student business was impacted by the timing of the school calendar.

But shares in Go-Ahead have plunged more than 13% after the transport group warned that strikes and upgrade works would deal a blow to its rail business.

The bus and train operator was hit by the sharp sell-off from investors after it pencilled in margins of 1.5% on its Govia Thameslink Railway (GTR) franchise, down 50% on the 3% analysts were expecting.

Shares were down 326.2p to 2106.8.

There was only one riser on the FTSE 100 Index, Ashtead Group, up 28.5p to 985.5p.

The biggest fallers were Anglo American, down 35.9p to 599.5p, Antofagasta, down 22.1p to 394.5p, Sky, down 41.5p to 850p, and Berkeley, down 130p to 2990p.