Doubts over the ability of EU leaders to deliver measures to ease the region’s debt crisis triggered a 2.5% slump for London’s leading shares index today.
With a summit of 27 countries in Brussels unlikely to produce a concrete plan to deal with the fall-out from a Greek exit from the euro, the FTSE 100 Index gave up all of Tuesday’s gains to close 136.9 points lower at 5266.4.
The meeting will also discuss how to get Europe growing again, but with Germany opposed to the idea of Europe-wide bonds markets were lower across the world, with the Dax in Germany and France’s Cac-40 sliding more than 2% and Wall Street’s Dow Jones Industrial Average 1% lower at London’s close.
The euro fell against most major currencies including the pound and US dollar, while the price of crude oil also tumbled in line with equity markets. Sterling bought almost €1.25, but it continued to fall against the safe haven of the greenback as it bought just over $1.57.
Fears over Asian powerhouse China were also to the fore after the World Bank cut its economic growth forecast for this year.
The heavily weighted mining sector suffered severe losses amid the increased eurozone uncertainty and Chinese fears with Vedanta Resources off 9% or 95.5p at 951.5p, Kazakhmys down 58p at 679.5p and Xstrata 46.7p lower at 926.2p.
And having attracted bargain hunters yesterday, banks were under pressure with Barclays off 8.4p to 180.5p and Lloyds Banking Group down 1.1p to 26.5p.
Luxury goods group Burberry was among the other fallers, even though its full-year revenues rose 24% to £1.8bn and it reported underlying pre-tax profits of £376 million, an increase of 26%.
Chief executive Angela Ahrendts said the company will continue to invest in its flagship markets including London, Chicago and Hong Kong, but with Goldman Sachs calling the results slightly disappointing shares fell 17p to 1369p.
BSkyB was one of only three top flight risers after the Competition Commission reversed an earlier ruling that there was too little choice for consumers in the pay-TV movies market.
The regulator had been expected to propose a series of remedies but is now not expected to do so after finding that newcomers to the market such as Netflix have widened the choice for consumers.
Shares were 2.5p higher at 693p.
Outside the top flight, FirstGroup shares were 7% or 15.2p higher at 220.1p as analysts said a 1% fall in pre-tax profits to £271.4m represented a reassuring performance after two profits warnings in 18 months.
It also unveiled a strategy to turnaround its bus division, which has seen profitability squeezed by fuel prices and government subsidy cuts.
There was comfort for long-suffering investors in grocery delivery firm Ocado, which rose 6p to 107.8p in the wake of a trading update.
It reported sales growth of 13% for the 12 weeks to May 13, a performance which Panmure Gordon stockbrokers said was better than expected.
The biggest FTSE 100 risers were Smith & Nephew up 2.5p at 594.5p, BSkyB ahead 2.5p at 693p and Aberdeen Asset Management up 0.1p at 241.3p.