TRADE war fears have sparked a global equity sell-off and wiped nearly £45 billion off the FTSE 100, which suffered its worst one-day decline in over a year.
London's blue chip index tumbled 2.24 per cent or 172.43 points to end the day at 7,509.84 points, with similar losses logged across Europe where the French Cac 40 and German Dax slumped 1.9% and 2.4% respectively.
It was the largest one-day drop for the FTSE 100 since April 18 2017, when it fell 2.46%.
Major US indexes including the Dow Jones Industrial Average and S&P 500 were also down around 1.5% each in early trading.
Global stocks were suffering declines amid fears of an escalating global trade war centred on the relationship between the US and China.
Donald Trump's administration in the US is now expected to announce plans to restrict Chinese investment across the country.
Fiona Cincotta, a market analyst at City Index, said: "Trade war fears appear to be ramping up almost daily. Initially traders were rather complacent that Trump's threats were just a hardball negotiating tactic.
"However, he has more than proved that his intentions are far more serious and damaging; this realisation has struck market sentiment hard."
The pound was also struggling to gain ground, trading flat against the US dollar at 1.326 and falling 0.1% versus the euro to trade at 1.134.
Brent crude prices slid by around 2% to $74.26 per barrel as profit-taking hit the oil market, which rose last week after an Opec meeting revealed plans for a smaller-than-expected rise in output from its members.
The cartel has been curbing production in recent years amid fears of a global energy glut.
In UK stocks, Tesco fell 0.6p to 261.1p as the grocer said it would scrap its "Brand Guarantee" price-matching scheme, with plans to instead focus on lowering prices of everyday products.
Shares in HSBC were down 18.6p at 702.3p.
It came as the bank confirmed the retirement of finance director Iain Mackay, who will step down after a total of 11 years at the lender.
He will be replaced by RBS finance chief Ewen Stevenson.
Diageo shares slumped 65.5p to 2,681.5p after the drinks firm proposed upping its stake in Chinese liquor company Sichuan Shuijingfang to 60%, up from its current 39.71% holding, for 62 renminbi (£7.14) per share.
However, Diageo said the proposal does not represent a takeover bid, and does not create an obligation for Diageo to put in an offer for the Shanghai-listed drinks business.
Unilever fell 19.5p to 4,114p after acquiring a 75% stake in Italian personal care business Equilibra, a company specialising in "natural" hair care and skin products.
The consumer goods giant said the firm will be run as a separate business.
Away from the top tier, Inmarsat jumped 26.2p to 632.2p as French satellite group Eutelsat confirmed it was considering an offer for its British rival.
It comes just weeks after Inmarsat shot down a separate takeover approach from US satellite business Echostar for undervaluing the business.
Countrywide shares plunged 23.5p to 55p after the troubled estate agency issued a profit warning, saying a subdued property market would result in interim earnings coming in around £20 million lower than last year.
It does not expect the shortfall to be recovered in the second half of the year.
The only risers on the FTSE 100 were ITV up 0.4p at 177p, United Utilities Group up 0.4p at 751p, and Associated British Foods up 1p at 2,836p.
The biggest fallers on the FTSE 100 were Carnival down 528p at 4,215p, Micro Focus International down 71p at 1,293p, Glencore down 18.15p at 369p, and Anglo American down 76.8p at 1,620.2p.
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