The London market has tumbled to its lowest close for nearly a month, knocking billions from the value of shares.
The Footsie-100 Index has closed down 152.3 points at 4028.6, its lowest finish since August 5.
Shares were hit by a slump on Wall Street as traders returned from a three-day break to further worries about the economy.
US stocks were partly hit by a key survey giving disappointing data on the manufacturing sector.
In addition, US chip giant Intel weighed on the market as shares fell ahead of an update due from the firm this week.
In London, heavyweight financial, telecom stocks and oil stocks bore the brunt of the falls.
BP and Shell both fell 6% as oil prices eased. BP fell 31p at 468p while Shell was down 28p at 406p.
Among the banks, a number of stockbroker downgrades hit shares, with Barclays off 22p at 432p and HBOS 26½p lower at 685p.
Other fallers included HSBC and Standard Chartered, which were hurt by heavy slides on the Hong Kong and Japanese exchanges Monday night.
Both have large businesses in Asia and HSBC fell 23½p to 701½p while Standard Chartered was 13½p lower at 711½p.