Traders returned to work after the long bank holiday weekend to find their screens awash with red as gloomy manufacturing data cast fresh doubts over the health of the global economy.
Weak sales in the eurozone, combined with the strong pound and the slowdown in China, saw employment in the UK manufacturing sector fall for the first time in more than two years, while similar factors meant growth at US factories was dragged down to the lowest level since May 2013.
But it was the data coming out of China that cast the darkest clouds over the markets, with two separate surveys pointing to wards an inexorable slowdown in the world’s second-largest economy despite recent efforts by the government in Beijing to support growth.
With the London market closed on Monday, the first trading session of the week saw the FTSE 100 tumble 3 per cent, or 189.4 points, to close at 6,058.54, having been more than 200 points lower during the day.
The fall wiped about £48 billion from the combined value of Britain’s biggest companies.
Tony Cross, market analyst at Trustnet Direct, said: “Given the current backdrop – uncertainty over just how bad things are in China, an assumption that more quantitative easing won’t help the eurozone plus the prospect of rate hikes before the year end in both the UK and the US – it’s difficult to see what it’s going to take to shift sentiment.
“These bouts of volatility don’t tend to vanish quickly and with a long weekend coming up in the US volumes will remain thin, only serving to exacerbate the situation.”
Engineer Meggitt was the only blue-chip riser, up 11.3p or 2.4 per cent at 488.7p. Glasgow-based Weir Group, which is likely to be demoted from the top-flight index, fell 49p or 3.5 per cent to close at 1,355p.