FURTHER fears about moves to rein in growth in China knocked commodities yesterday, sending the FTSE 100 index to the lowest level of the year.
Shares in mining companies have been falling sharply in recent days on concerns over demand if China takes action to cut investment.
James Hughes, at CMC Markets, said the market fall reflected "enduring concerns that the Chinese authorities will introduce further measures aimed at cooling down the country's overheating economy".
Last week, rumours hit the market that the government had effectively told domestic banks to stop lending to curb growth.
Fresnillo led the declines in the sector – down 26p at 672p – followed by Anglo American, which fell 78p to 2,379p.
The wider FTSE 100 tumbled 59.38 points, or 1.1 per cent, to 5,217.47, its lowest close since 18 December.
Banks were also down ahead of the US Federal Reserve's latest interest rate decision.
Barclays and Royal Bank of Scotland were back under pressure, falling 9.15p to 266.85p and 1.81p to 32.99p respectively.
Lloyds Banking Group dropped 0.87p to 50.84p, and HSBC fell 10.6p to 663p.
Morrisons' shareholders failed to be stirred by the announcement that Dalton Philips, a former executive for US giant Wal-Mart, is to be the chain's new boss. Shares lost 1.9p to 292.8p.
Man Group was the biggest loser – off 17.1p to 246p – as Credit Suisse cut its target price for the hedge fund group's shares.
Tullow Oil, Europe's largest oil exploration specialist, dropped 56p to 1,160p after placing more than 80 million new shares, raising 925 million.
Insurer Resolution rose strongly, up 1.9p at 81.55p. The consolidation vehicle is expected to complete more deals in the coming months.
Defensive companies were in demand as investors recycled money away from mining shares. Brewer SABMiller rose 26p to 1,693p and British American Tobacco climbed 25p at 2,070p.
ICAP, the interdealer broker which has been hit in recent days by fears that President Barack Obama's banking reforms may cut its revenues, rose 4.3p to 384.3p.
Cobham, the defence group, rose 1.1 per cent to 233.1p after Morgan Stanley named it as its top pick in the sector.
Outside the top flight, drinks company Britvic, the firm behind the Robinsons brand, rose strongly.
Analysts said a return to growth in the water and sports drinks category represented a significant trend for Britvic. Shares jumped 27.3p to 431.7p after it reported an 11 per cent rise in first-quarter sales.
Pubs group Greene King rose 9.6p to 442.6p after reporting that it had seen strong Christmas trading, although it added that sales had moderated since then due to January's cold weather.
Among the small caps, shop and school fitter Havelock Europa issued its third profits warning in as many months, sending shares down 13.5 per cent to 16p.
On Aim, Bowleven, the West Africa-focused exploration company, dropped a quarter of a penny to 106.25p, despite news that exploration director Ed Willett has bought 50,000 shares. Earlier this week, Bowleven said 2010 was gearing up to be the busiest in its history, with up to four wells planned in Cameroon and Gabon.
Faroe Petroleum, the North Sea explorer, rose a penny to 128p after the UK government announced that a field tax allowance, aimed at encouraging investment in difficult to develop discoveries, was being extended to cover the area west of the Shetland Islands, where Faroe has a large position.