THE FTSE 100 Index slumped more than 100 points, wiping more than £30bn off the combined value of blue-chip firms, after a volatile session of ups and downs amid continuing anxiety over China.
Early trading saw the index of the top 100 UK-listed companies slump more than 100 points, later bouncing back to register a slight gain, before finally closing down 1.7 per cent, or 102.1 points at 5,979.2.
Germany’s Dax and France’s Cac 40 were also down by around 1 per cent.
London’s listed mining giants - which have been badly hit by the slowdown in China and its impact on commodity prices - were at the heart of the volatility, seeing both falls and climbs during the day.
The latest turbulence came after a 3.1 per cent rise in the FTSE 100 in the previous session, boosted by an interest rate cut from China.
That had followed a 10-day run of declines for the index, its longest losing streak since 2003, including a 4.7 per cent fall on Monday that was the joint-worst one-day drop since the dark days of the downturn in 2009.
The latest session in London saw an initial steep fall of around 130 points, or 2 per cent, following a Wall Street slump late the previous day and another fall overnight for China’s Shanghai Composite.
Connor Campbell, financial analyst at Spreadex, said European markets had later been buoyed up by hints that the European Central Bank would be ready to inject more stimulus into the eurozone economy if needed.
But he added: “Such robust trading couldn’t last long, with losses beginning to widen once again after the post-US open dust settled.”
He said the situation would become even more complicated tomorrow with the latest second quarter US growth estimate expected to see the performance of the world’s biggest economy revised up.
Yet the reading “might struggle to make itself heard if the markets have to endure another choppy Asian session”.
Global markets have been rocked in recent weeks by the slowdown in China, the world’s second biggest economy, and the depreciation of the yuan.
Chancellor George Osborne has said the volatility showed that “lots of risks” remained in the global economy and that Britain was “not immune to what goes on in the world”.
Recent falls have seen the FTSE 100 fall into “correction” territory, more than 10 per cent off its all-time closing high of 7,104 in April.
In global markets, investors were balancing strong US economic data with fears about China’s slowing economy.
“Everybody’s just on guard and aware of the potential for greater volatility than we’ve seen in quite a while. We’ve seen investors dip their toes and buy high-quality names they like that they can get cheaper,” said Brian Fenske, head of sales trading at ITG in New York. He added, “You could call me two hours from now and we could be down.”
Some fund managers said they were looking at buying opportunities.
Other, more short-term investors said they were selling out of positions taken earlier in the week.
“On a short-term basis, I am willing to increase my risk and buy. I believe the market is offering opportunities,” said Michele Patri, portfolio manager at AllianceBernstein. “But medium-term the situation looks complex. When you see how stocks exposed to global growth are performing, you can really see how investors do not have faith in the outlook.”