The Footsie plunged on the first day of New Year trading, weighed by tumbling markets in China and weak UK manufacturing data.
The FTSE 100 Index slumped 2.5%, or 150.2 points to 6092.1, after Chinese stock markets were automatically suspended overnight following falls of at least 7% amid weak factory output data from the world’s second largest economy.
Germany’s DAX was down 4%, while the Cac 40 in France was more than 2% lower.
The suspension of markets in China is a new circuit-breaker measure introduced in early December, designed to limit volatile trading the nation suffered last summer as its economy slowed down. It is the first time the measure has been used.
The China sell-off was sparked by a factory activity survey showing a contraction for the 10th consecutive month as well as falls in its yuan currency.
The London market was also driven lower by a closely-watched UK manufacturing survey showing that Britain’s output grew at its slowest pace for three months.
The Markit/CIPS UK manufacturing PMI fell to 51.9 in December, down from 52.5 in November and October’s measure, with any figure over 50 indicating expansion.
The pound was slightly higher against the US dollar at just under 1.48, but this still constituted a nine-month low driven down by a combination weak commodities and fears that the UK may vote to leave the European Union.
Traders are also concerned that a hike in UK interest rates is a long way off, leaving the pound under pressure. Sterling was slightly lower against the euro at 1.35.
In London, miners who count China as a major customer were big fallers. Anglo American was down 20.7p to 278.8p, Glencore fell 6p to 84.5p, while Antofagasta slipped 20.2p to 449.1p.
Oil firms were also lower in the wake of Saudi Arabia cutting diplomatic ties with Iran, two of the world’s biggest oil producers.
BP fell 9.7p to 344.4p, while Royal Dutch Shell was 29p lower at 1514p.
Pharmaceutical giant Shire was down more than 3%, or 158p to 4540p, amid speculation the Irish-based firm is close to completing a takeover of US rival Baxalta.
This would complete a process that started in August, when Shire announced an all-stock deal then valued at 30.6 US billion US dollars (£20.7 billion), which the Baxalta board rejected as undervaluing the firm.
Analysts say Shire is likely to increase its offer to complete the deal.
Recommended for you
