London's top flight index fell to its lowest level for three years as sharp falls in banking stocks and fears over global growth continued to weigh heavy on the market.
The rout on the banks - which triggered a 2.7% plunge in Monday's session - continued apace as stocks in the UK's leading financial institutions came under pressure amid concerns over their ability to withstand a slowdown in the global economy.
The FTSE 100 Index dropped 1%, or 57.1 points, to 5632.1, losing early-session gains and delving to levels not seen since 2012.
The index has now fallen on 17 days out of the 27 trading days since the start of the year.
Elsewhere in Europe, Germany's DAX and the Cac 40 in France were both down more than 1%.
The falls followed a punishing session in Asia, where Japan's market sank 5.4% as it digested the potential threat of more global economic gloom.
Banking stocks took a hefty hit in the FTSE as fears intensified that a slowdown in the Chinese market, the falling price of oil and rock-bottom interest rates could steer the sector towards another meltdown.
Brent crude offered little cheer to the bleak global economic outlook as it fell 85 cents to 32 US dollars a barrel.
The pound was up a cent against the dollar at 1.44, while the pound was down a cent against the euro at 1.28.
It came as Britain's yawning trade gap grew to its highest level since 2010 following an £8.1 billion plunge in the export of goods.
The Office for National Statistics (ONS) said the deficit - the difference in value between UK imports and exports - widened by £300 million to £34.7 billion in 2015.
In stocks, Barclays was down 4.6%, or 7.6p, to 156.2p, Standard Chartered fell 5.5%, or 23.7p, to 403.3p, while Lloyds Banking Group dropped 2%, or 1.23p, to 58.1p.
London miners were also among the heavy fallers after a brief resurgence during the day, as Anglo American and Glencore were subject to price target cuts by Goldman Sachs.
Rio Tinto was down 4.8%, or 89.5p, to 1751p, Glencore dropped 8.1%, or 8.2p, to 94.6p, with Anglo American falling 11.2%, or 42.1p, to 333.9p.
Holiday operator TUI Group also saw its share price come under pressure as holidaymakers shunned Turkey in the face of terrorist attacks and continued fighting in Syria.
The company - which reported holidays to Turkey were down 40% - saw its share price drop 15p to 1083p.
Rival holiday firm Thomas Cook Group also saw shares drop 1.9p to 91.4p ahead of its update to the market on Thursday.
The biggest risers in the FTSE 100 Index were Next up 3.6% or 235p to 6665p, WPP up 3.3% or 45p to 1383p, Carnival up 2.6% or 77p to 3034p and Wolseley up 2.2% or 73p to 3303p.
The biggest fallers in the FTSE 100 Index were Anglo American down 11.2% or 42.1p to 333.9p, Antofagasta down 9.3% or 42.5p to 410.9p, Glencore down 8.1% or 8.2p to 94.6p, and BHP Billiton down 5.8% or 41.4p to 666.1p.