FTSE 100 drops 1.61%

The FTSE closed down 87.60 points to 5,362.30, with an end of day fall adding a sour note to a gloomy day.

British Airways fell 8.07 per cent while miner Eurasian fell 6.50 per cent.

Builders merchant Wolseley dropped 6.41 per cent as recent confidence in construction faded.

BG Group was down 6.32 per cent and Prudential dropped 6.22 per cent.

Meanwhile DIY retailer Kingfisher rose 6.60 per cent on encouraging results, while British Energy was up 6.20 per cent on takeover from Centrica and EDF.

Enterprise Inns rose 4.20 per cent and London Stock Exchange Group was up 2.97 per cent. Pharma firm Shire climbed 2.81 per cent.

David Jones, chief market strategist at IG Index, said: "The stock market has been under pressure for most of the day with any short rallies proving to be unsustainable.

"Mining and oil stocks have been particularly hard hit, with commodities continuing the recent run of weakness – the oil price has moved down to around $124 a barrel, a level not seen since early June."

However, Mr Jones claimed the rally that has pushed the FTSE from the 5000 levels just over a week ago was still in place.

"No market moves in a straight line up or down and for now traders are eyeing recent lows in the 5275/5300 area and expecting this to stem any further slides. Only if this level gets broken by the FTSE does it suggest that the trap door has opened once again and the recovery is over."