The UK FTSE 100 dropped to its lowest level in over three and a half years on Wednesday, shedding 135 points – wiping £35 billion off the value of its constituent firms.
The index plunged to as low as 5,499.51 points before recovering slightly, finishing 2.4 percent weaker at 5,536.97 points.
There was a sharp sell-off in financial firms and mining stocks. The UK Banks index fell 5 percent to a seven-year low amid concerns about profitability in an environment of low growth and low-interest rates.
Barclays was the worst-performing company in the financial sector, sliding 6.4% – down by almost a third since the beginning of the year.
The UK oil and gas index and the mining index fell by over 2 percent, with shares in BP down 6 percent and Miner Rio Tinto down 3.4 percent.
The Footsie wasn’t alone though. Markets all across the world also experienced steep declines. In Europe, the German DAX dropped 2.9%, the French CAC fell 4.1%, and Italy’s MIB ended 5.6% lower.
Across the pond, the S&P 500 dropped 1.23% and the Dow Jones dropped 1.6%.
The current global market volatility follows gloomy comments made by US Federal Reserve chair Janet Yellen about the state of the world economy.
Yellen warned in her testimony to a Congressional committee on Wednesday that US financial positions had become “less supportive” of growth despite the Fed raising rates in December.
She cited the economic slowdown in China and the oil market slump as emerging threats.
She said: “This uncertainty led to increased volatility in global financial markets and, against the background of persistent weakness abroad, exacerbated concerns about the outlook for global growth.”