The FTSE 100 Index fell 92.30 points, or 1.6%, to 5,670 points today, led by miners after US Federal Reserve chairman Ben Bernanke last night hinted at further interest rate rises.
BHP Billiton dropped 4.48% to 992.50p, while Antofagasta fell 4.39% to 1,959p.
Fund managers were also playing havoc as Amvescap dropped 5.90% to 486.50p and Schroders fell 4.31% to 1,000p in sympathy with the global stock market downturn.
On the plus side, BAA advanced 2.16% to 948p after it agreed late last night to recommend a takeover offer of 950p a share, or £10.3bn in total, from a consortium led by Spain's Ferrovial.
In the US, the Dow Jones Industrial Average has lost 35.62 points, or 0.3%, to 11,013.10 points on concern the Federal Reserve will keep raising interest rates to curb inflation, choking off economic growth.
Homebuilders, among companies most sensitive to increases in borrowing costs, have fallen as Wachovia Securities downgraded D.R. Horton and three rivals on speculation demand is slowing.
D.R. Horton has fallen $1.61 to $23.20 and Pulte Homes has dropped $1.35 to $28.40.
US Steel has also fallen $2.44 to $62.58.IFAonline
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