More than £30 billion was wiped off the value of blue-chip stocks by the end of a volatile session that saw the FTSE 100 buffeted by continuing fears over the Chinese economy.
Early trading saw the top-flight index tumble more than 100 points before bouncing back during the day to register a modest gain, but the Footsie eventually closed down 102.14 points or 1.7 per cent at 5,979.2.
Jasper Lawler, market analyst at CMC Markets, said: “Financial markets have clearly become addicted to central bank stimulus and, like any addict, they are getting more erratic.
“The huge about-turn on Wall Street on Tuesday was almost as harrowing as the volatile opening decline on Monday. The reaction to stimulus being injected or withdrawn is becoming more volatile and central banks pandering to market demands could be making matters worse.”
Miners – which have been among the hardest hit by jitters over China – had a topsy-turvy session, with BHP Billiton rising as much as 2 per cent before ending the day 11.5p lower at 1,009.5p. Rio Tinto closed down 2 per cent or 44.5p at 2,200p while Anglo American dropped 19.4p to 664.3p – a decline of almost 3 per cent.
Elsewhere, Royal Bank of Scotland headed in the right direction after it was named in a bullish broker note from Jefferies on prospects for the UK mortgage market. Shares in the state-backed lender rose 2.9p to 324.1p. However, rival Barclays fell 4.35p to 252p and fellow bailed-out firm Lloyds Banking Group dipped 0.6p to 76.08p.
There were better fortunes for online gambling outfit Betfair, which jumped 531p or 20.4 per cent to 3,134p after unveiling plans for a merger with Paddy Power to create a group with revenues of more than £1 billion.