The FTSE plummeted over 1% in early trading, dropping to 4,187 points by 8.43 this morning.
The movements were driven by commodity-related firms, with Rio Tinto down 61p (just over 3%) to 1,965p off the news it has agreed to sell its Alcan Food Americas division for $1.2bn (£739.3m) to US firm Bemis, towards paying off further debt, following its recent $15.2bn rights issue.
Meanwhile, Tullow Oil and Xstrata join the commodity firms struggling, down 29.50p (3.23%) to 883p and 17.20p (2.63%) to 637.60, respectively.
The latter's falls in particular could be attributed to South Africa's latest declaration, supporting Anglo American's rejection last month of the merger proposal put to it by Xstrata.
The country's mines minister expressed concern to Anglo's CEO last week over too few companies controlling commodities.
Anglo is down 2.60% or 44.5p to 1669p this morning. However, rumour is building over Chinalco's interest in a partnership with the mining and resources giant.
Meanwhile, in financial services, Old Mutual and Prudential also lost traction, falling 2.32p (2.81%) to 80.30p and 10p (2.48%) to 393.25p.
Life insurance as a sector is down 2.64%, to 2,842 points overall this morning.
Interest rate outlook unchaged
'Will remain an independent business'
Despite improved risk appetite
FOS award limit increase