Miners are among the early fallers on the FTSE as European markets tumble following a ban on naked short-selling in Germany.
At shortly before 9.30am, London's leading index was down 2.46%, or 130.54 points, at 5,176.80.
Elsewhere across Europe, shares fell sharply and the euro hit a new four-year low after Germany's financial regulator last night announced new curbs on financial speculators.
The clampdown on 'naked' short selling - the practice of selling shares without owning them - covers sovereign bonds issued by eurozone countries, credit default swaps (CDS) on those bonds, and the shares of 10 of Germany's biggest financial institutions. It will run until 31 March next year.
This morning, France's Cac 40 is down 2.39% to 3,530, while the German Dax is 2.16% lower at 6,022.
In London, miners lost ground as they bore the brunt of the investor sell-off. As of 9.40am, there are no winners.
Xstrata was down almost 7% to 939.9p, Vedanta Resources lost 5.6% to £22.13 and Kazakhmys plunged 5.6% to £11.52.
In Asia, the Nikkei 225 ended 0.5% lower at 10,186.84 points amid fears over Europe. In morning trade in Tokyo, the euro dropped to $1.2143, its lowest level since April 17, 2006.
Overnight in New York, the Dow Jones ended 1.1%, or 114 points, down at 10,510.95 as financial heavyweights Bank of America, JPMorgan Chase and Citigroup all fell more than 2%.
The largest US shares face new trading restrictions after regulators devised a plan to avoid a repeat of the plunge in values on 6 May.
The Securities and Exchange Commission (SEC) has proposed so-called "circuit breakers", which would temporarily halt trading in a stock if it fell more than 10% in five minutes.
On 6 May, the Dow Jones plunged some 700 points within minutes. An investigation found no single cause for the drop.
