Commodities giant Glencore led the London market under the 6000-mark as the stock fell by as much as a third amid the latest fears over China's growth prospects and a gloomy broker note.
The FTSE 100 Index fell 150.2 points to 5958.9, wiping out the gains seen in the previous session when it had surged by nearly 150 points.
Germany's Dax and France's Cac 40 were also both down by around two per cent. In New York the Dow Jones Industrial Average was down by 170 points in early trading.
It came after figures showed profits at China's major industrial companies fell 8.8 per cent in August, the latest sign of weakness in the world's second largest economy.
The disappointing update dragged UK-listed miners down but it was under-pressure Glencore that took the brunt, plunging by nearly a third below its opening mark during the course of the session.
It came after a broker note from Investec's Hunter Hillcoat said it - and another miner, Anglo American - could see "nearly all the equity value... evaporate" should commodity prices remain at current levels.
By the end of the session, Glencore was 29 per cent, or 28.6p, lower at 68.6p. Anglo American fell 10 per cent, or 62p at 552.7p. Also in the sector, Rio Tinto dropped 106p to 2111p and BHP Billiton slipped 61.9p at 964.1p.
In currency markets, the pound was little changed against the US dollar at just under 1.52 and was also not much changed against the euro at just over 1.35.
In London shares, Vodafone was among the fallers after the telecoms giant said talks with cable firm Liberty Global over a potential asset swap had been terminated. Shares fell nearly five per cent, or 10.5p, to 207.2p.
The move saw gains for ITV. Liberty had upped its stake in the broadcaster earlier this year and while it said it did not intend to acquire the group, the collapse of discussions with Vodafone added to speculation. ITV rose 2.3p at 250.5p.
The biggest FTSE 100 riser was brewing giant SABMiller amid reports that takeover suitor Anheuser-Busch InBev was close to announcing a formal bid that would value it at around £74 billion.
Shares in SAB, which makes Peroni and Grolsch, rose more than one per cent, or 46.5p at 3634.5p.
Elsewhere in the top-flight, a broker upgrade from Bernstein's Bruno Monteyne sent Morrisons higher. He said actions taken by new boss David Potts "all make sense".
With costs cut, the wider economy improving and one-off restructuring charges coming down, he argued that the group was set up for "solid" earnings growth though remained "negatively inclined" in the long term. Shares added 1.2p to 155.5p.
Outside the top-flight, tool rental business Speedy Hire plunged after its second profits warning in three months saw it slash 200 jobs, with its turnaround plans taking longer than expected. Shares fell 15 per cent, or 5.8p, to 31.3p.
The biggest risers in the FTSE 100 Index were SABMiller up 46.5p at 3634.5p, BAE Systems up 4.5p at 444.5p, ITV up 2.3p at 250.5p and National Grid up 7.1p at 898p.
The biggest fallers in the FTSE 100 Index were Glencore down 28.6p at 68.6p, Anglo American down 62p at 552.7p, BHP Billiton down 61.9p at 964.1p and Antofagasta down 25p at 481p.
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