Britain's FTSE 100 suffered its lowest finish since December on Tuesday in a world-wide equity sell-off as investors fretted over inflation and global interest rates and bid hopes faded for Alliance & Leicester.
Miners and oil heavyweights - sectors which played a dominant role in driving the UK stock market to multi-year highs this year - slid as the value of metals such as gold and copper and crude oil fell sharply.
The FTSE closed the session 101.3 points, or 1.8 percent, lower at 5,519.6 points - its lowest finish in six months. Earlier, the index fell as far as 5,467.4 points.
The index is 10 percent below a 5-year high hit in April at 6,137.1 points which had been inspired by soaring commodity prices boosting expectations for natural resources companies' earnings, a raft of bid activity and solid corporate profits.
UK-focused stock market sentiment drooped after consumer price inflation rose above the Bank of England's 2 percent target in May for the first time in six months, although most analysts said the reading did not guarantee interest rates would soon rise.
US producer price inflation data did little to tame global borrowing cost concerns, showing core prices rising more than expected and indicating that rising prices may be working their way from producers to consumers.
Analysts are trying to predict when the equity sell-off will reach a nadir. Many say the FTSE is already looking good value on historical terms and relative to other asset classes. "The equity market is arithmetically very, very cheap," said Edward Menashy, economist and strategist at Charles Stanley.
"It (the FTSE) is standing on a price to earnings ratio of 12, earnings are expected to rise next year. On that basis, I see really no reason for this fall continuing."
Bank Alliance & Leicester fell 5.6 percent with hopes of a take-over of the company fading after oft-mooted predator Credit Agricole offered to buy Greek bank Emporiki for almost $4 billion, dealers said.
The fall came despite the French bank saying it was still assessing Alliance & Leicester. Nonetheless, some analysts said a bid for the UK lender looked less likely. Other financial stocks fell as investors reacted to concerns about potential higher interest rates and weak equity markets.
Hedge fund manager Man Group fell 4.3 percent and South African insurer Old Mutual shed 4.6 percent.
Miners crowded the list of FTSE losers with Kazakhmys down 7.1 percent, pure copper play Antofagasta off 5.4 percent and Anglo American 3.7 percent lower. The sector contributed 15 points to FTSE downside as copper and gold fell sharply.
Oil heavyweight BP fell 2.2 percent and Royal Dutch Shell slipped 1 percent as crude oil prices slipped below $69 a barrel in a broad commodity market sell-off.
Oil explorer Cairn Energy fell furthest in the sector, down 4.7 percent.
Only a handful of stocks traded in the black while telecoms firm Cable & Wireless traded flat. C&W trades without the right to the latest dividend payment on Wednesday, dealers noted.
The FTSE mid-cap index hit its lowest level this year during the session at 8,674.2 points and closed down 2.9 percent with technology, software and commodity stocks hardest hit. The mid-cap index is 14 percent off an all-time high hit in May.