A fall in mining shares on the back of drops in metal prices led the FTSE down 0.8% to 5,202.85 points in early trading.
This morning, gold, silver, aluminium, copper, nickel and tin all dropped by between 0.1% and 3.8%.
In addition Brent Crude was off 1% at $78.72 per barrel.
Consequently, miners and oil firms registered four of the FTSE's five most severe falls by 8.30am.
Xstrata was off 3.1% at £10.15; Kazakhmys was down 2.8% at £11.62; Vedanta Resources shed 2.4% to £23.59; Lonmin dropped 2.3% to £16.52; and Rio Tinto was down 2.1% to £33.72.
The FTSE was not helped by poor US home sales statistics for June, released after UK markets closed yesterday.
Keith Wade, chief economist at Schroders, says the housing sector in the US has been weak for the past couple of months and although it is a concern it is not surprising.
"The more general concern is that the US is losing a bit of momentum as other survey measures are peaking out too," he adds.
The data spurred concerns on Wall Street the global recovery may not be as robust as hoped, leading UK investors to rotate into defensive stocks this morning.
Imperial Tobacco Group and British American Tobacco each rose 0.8%, to £19.28 and £21.92 respectively.
BP rose 0.9% to 337p, despite the US Government announcing it will appeal a US court decision overturning a temporary ban on offshore drilling.
Meanwhile, UK banks lost some of the gains they saw yesterday when Chancellor George Osborne's bank levy was lower than feared. Barclays, Royal Bank of Scotland and HSBC all saw their share prices fall today.
A sell-off in the closing hour of US trading left the Dow Jones 1.4% lower at 10,293.52 points. The S&P 500 shed 1.6% to close at 1,095.31.
On the disappointing home sales report, Whirlpool fell 5.4% to $97.94, while Home Depot dropped 2.6% to $30.61.
In Asia, Japan's Nikkei fell 1.9% to close at 9,923.7 points.
Exporter Toyota Motor Corp fell 1.7%, and was the second biggest drag on the Asia Pacific stock performance.
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