The UK’s blue-chip index of leading shares officially entered correction territory after falling more than 10 per cent since its recent record high.
A sell-off in London followed on the heels of a rout in New York that has seen the S&P drop 5.5 per cent in the past six days - the longest losing streak of Donald Trump’s presidency. Energy shares took a particular battering as oil slid back to $81 a barrel from a four-year high of $86.34 last week.
Asian markets plummeted even further. The Nikkei fell 4 per cent while China’s Shanghai Composite gauge closed down more than 5 per cent and Taiwan’s benchmark was down 6 per cent.
Global policy uncertainty has damaged confidence as a trade war between US and China - the world’s two largest economies - has escalated, with little sign of resolution.
Brexit, Italy's budget deficit, slowing growth in China and rising US interest rates have also weighed on markets.
As US stocks fell at their fastest rate since February, Donald Trump attacked the Federal Reserve on Wednesday, accusing officials of “going loco” over interest rate hikes.
Mr Trump said that the market plunge was caused by the US central bank’s multiple rate rises and was nothing to do with the tariffs he had slapped on Chinese goods.
“That wasn’t it. The problem I have is with the Fed,” he said. “The Fed is going wild. They’re raising interest rates and it’s ridiculous. The Fed is going loco.”
He added: “They’re so tight. I think the Fed has gone crazy.”
Analysts saw little sign of respite for markets as difficult conditions look set to continue.
Lukman Otunuga, research analyst at FXTM said: “It is becoming clear that global equity markets are facing a perfect storm of headwinds such as rising US bond yields, US-China trade disputes, global growth concerns and prospects of higher US interest rates.
“For as long as these themes remain, appetite for stocks are likely to diminish further consequently fuelling speculation over the bull party coming to an end.”
Helal Miah, investment research analyst at The Share Centre said the Fed may have to raise interest rates further to cool a US economy turbo-charged by Donald Trump’s tax cuts.
He added: “This global stock market sell-off should not come as a big surprise, but the question that some investors will be asking is one of whether we will see a quick bounce back like we saw at the start of the year.
“This time round it may be different; previously the sell-off and bounce back had been led by [Facebook, Amazon, Netflix, Google and other] tech companies.
“With increasing questions about these companies’ valuations and all the other overhanging worries in the global economy, it may be a while until we see those all-time highs again.”