A torrid day for the miners, sharp falls for banks and pressure on energy stocks hit the FTSE 100 particularly hard on a day when the index of blue chips was rattled by intensifying fears over the US economic outlook.
After a sharp sell-off in Asia, London markets woke up in a gloomy mood and only a handful of shares managed to climb out of the sea of red.
Grim predictions about the world's largest economy prompted a sell-off in metal and oil and miners also were at the top of the long list of fallers.
With sellers dominant for the fifth day running, the index ended down 323.5 points, 5.5%, at 5578.2. Almost £77bn was wiped off the value of leading shares. It was the FTSE 100's biggest one-day fall in history in points terms. In percentage terms it was the sharpest one-day fall since September 11, 2001, when the index shed 5.71%.
To drive home how gruesome the year has been so far for stock markets, in just 14 trading days of 2008, the FTSE 100 has shed 13.6%.
Yesterday it was the miners that were falling fastest as metals, from copper to gold, were sold off on the prospect of lower demand as the global economy slows. BHP Billiton was the biggest loser, down 143p, or 10.4%, at £12.35. The miner failed to fulfil market expectations with a fresh bid for rival Rio Tinto and that, combined with lower metal prices, left Rio down 472p, or 10%, at £42.28.
Not that bid news was enough to lift a miner yesterday.
Xstrata was only briefly buoyed up by the disclosure that Brazilian rival Vale had held takeover talks with the Anglo-Swiss firm. Xstrata shares still ended down 184p, or 5.5%, at £31.79.
With the oil price also knocked sharply lower by fears that a US recession could hammer demand, BP and its London-listed rivals suffered.
US crude slipped below $89, and that meant BP lost 35p, or 6.3%, to 519p, Royal Dutch Shell shed 108p, or 5.7%, to £17.75 and Tullow Oil fell 36p, or 6.5%, to 518p. Among the midcaps, Premier Oil, was down more than 10% at £11.61.
Away from commodity-related stocks, two of the day's four risers on the FTSE 100 were insurers.
Friends Provident was boosted by US private equity group JC Flowers' bid interest and closed up 5.5p, or 3.6%, at 158p.
Life insurer Resolution, which has agreed a takeover by rival Pearl, also closed up, but by just 0.5p, less than 0.1%, at 712p.
Back among the fallers, banks continued to suffer from jitters affecting global financial markets. Royal Bank of Scotland was down 30.5p, or 8.2%, at 342.75p, Barclays lost 6.5% to 420.75p, Lloyds TSB shed 6.9% to 373.5p and HSBC lost 6.4% to 712p.
Northern Rock was the only London-listed bank to show a rise, up 29.75p, or 46%, at 94.25p. It was the FTSE 250's biggest riser by a long way after the government outlined its plans for the stricken lender.
Elsewhere among the midcaps, New Star Asset Management shares were up 5.5p, or 5.4%, at 106.75p on speculation it has become a takeover target after last week's share-bashing profits warning.
Books, music and video store HMV continued to make headway following last week's record Christmas sales figures. The retailer added another 5.25p, or 5.1%, to 107.5p.
Waste collector Biffa was up 9.25p, or 2.8%, at 341p on reports of an approach.
Sports Direct did not fare so well as fellow retailer HMV, down 2.25p at 96p. The company said it was expecting an "increasingly difficult" trading environment in coming months.
Back among the blue chips, building materials supplier Wolseley was under pressure after it said a slowdown in the US housing market was hitting business. The shares ended down 26.5p, or 3.7%, at 689.5p, having slumped as low as 630p at one point.
Analysts at Citigroup said: "There is little positive comment in the outlook as markets are expected to become more challenging over the next few months.
"US housing is expected to deteriorate ... There are signs of further weakening in some European markets."
The owner of Rupert Bear and Basil Brush, Entertainment Rights, spooked the market last week with a profits warning and yesterday said it was in preliminary talks with a potential buyer. The shares gained 0.1p at 8.1p.
On Aim, human resources firm Hat Pin headed the other way after a dire profits warning. The shares closed down 33p, or 41.8%, at 46p after the company said profitability for the year had been "materially impacted" by the poor performance of one of its key divisions and "is now expected to be around 25% below market expectations".
Also on the junior market, Melrose Resources was in demand posting a positive update on gas reserves in Bulgaria, the shares up 1.5p at 325.25p.
Finally, music and marketing business MAMA was up 0.9p, or 18.4%, at 5.63p after it reported a swing into underlying profit in 2007 from a loss in 2006. The owner of London's Jazz Cafe and G-A-Y Bar flagged up growing demand for live music and events.