Falling pound and fearful markets add to the turmoil

The FTSE 100 Index was down 81.8 points at 6463.6 and there were also hefty falls across European indices amid mounting fears over the impact of the vote to leave the EU.

Sterling slumped below ​$​1.28 for the first time since 1985 at one stage and also dropped as low as 1.16 euros before paring back losses slightly.

The pound was later down 0.8​ per cent​ against the dollar at 1.29.

The market falls brought an abrupt halt to last week’s bounce-back, with moves by fund managers to lock down their commercial property funds fuelling investor fears.

Britain’s biggest grocers also took a hammering amid reports that Asda could slash prices over the summer and send profits plunging across the sector.

Tesco was the biggest faller on the London market, tumbling 8​ per cent​, or 14.2p to 161.6p, after HSBC analyst David McCarthy warned that Asda was eyeing a “major price repositioning” that could “seriously damage sector profitability”.

Morrisons also came under fire, down more than 7​ per cent, or 13.4p to 172.4p, while Sainsbury’s fell 3​ per, cent​ or 8.3p to 214.6p. HSBC downgraded Tesco from buy to hold and Morrisons from hold to reduce, while also cutting its price target for Sainsbury’s from 175p to 165p.

In Europe, Germany’s Dax was 1.6​ per cent​ lower and the Cac 40 in France was down 1.8​ per cent​, with oil prices also dropping in a sign of the market jitters.

Craig Erlam, senior market analyst at OANDA, said: “Negativity finally appears to have gripped investors following a rebound last week that appeared to suggest that Brexit fears were easing. These have ramped up this week.”

The property woes added to warnings from the Bank of England that Brexit effects were already taking hold, as well as recent economic figures pointing to a sharp slowdown in growth.