The FTSE 100 lost more than 1 per cent as factors combined to take billions off the value of Britain’s top firms.
Pharmaceutical stocks were among those on the back foot as US lawmakers closed a tax loophole that was thought to have encouraged several recent takeover bids in the sector.
AstraZeneca slipped more than 3 per cent, down 163.5p at 4,414p, as the move to curb “inversion” deals that allow companies to escape high US taxes by reincorporating abroad was judged to threaten any further bid from rival Pfizer.
The FTSE 100 Index slumped by 97.55 points or 1.4 per cent to 6,676.08 after a survey of businesses showed the eurozone continued to stagnate, with activity falling to a nine-month low.
Tony Cross, market analyst at Trustnet Direct, said: “We’re seeing something of a perfect storm forming in equity markets right now.”
Tesco was again the subject of another sell-off after Monday’s admission that it over-stated profits guidance by an estimated £250 million.
Shares were down by a further 4.2 per cent or 8.5p to 194.5p after data from Kantar Worldpanel showed a fresh slip in its market share.
Sainsbury’s and Morrisons were also exposed as losers and were 15p lower at 263.8p and 4.4p cheaper at 174.6p respectively.
Outside the top flight, retailer Mothercare fell 4.25p to 244p after it asked shareholders for £100 million to help pay for its UK store turnaround programme.
But shares in Spirit Pub Company jumped 17 per cent after it confirmed that it had rejected a takeover approach worth 100p a share – or £660 million – from rival Greene King. With Greene King reported to have made an improved approach of 110p a share, Spirit lifted 13.35p to 88.75p.