Nearly £32 billion was wiped off the value of UK blue chips after Donald Trump smashed hopes of an imminent trade deal with China and threatened to slap hefty tariffs on France and the EU.
The top tier plunged to its lowest level since late October after the US president said there was little prospect of a US-China trade deal until after the American elections next year.
He sent stocks into a tailspin after his renewed threat of tariffs fuelled fears that it could impact UK-EU relations.
London’s top flight, which predominantly consists of international-focused firms, tumbled 127.18 points or 1.7% to 7158.76, having slumped as low as 7135 at one stage.
The prospect of putting off any deal has completely upended market expectations that we were potentially millimetres away from a dealMichael Hewson, CMC Markets
It followed Trump-inspired losses on Monday when the FTSE 100 shed 0.8% after he came came back from the weekend after Thanksgiving having decided to impose tariffs on Brazilian and Argentinian metals.
It was also a sea of red on Wall Street in Tuesday trading, where the Dow Jones Industrial Average was 1.4% lower at the time of close in London.
The Cac 40 finished 1% lower, although the Dax in Germany eked out a slight gain, closing 0.2% higher.
Michael Hewson, chief market analyst at CMC Markets, said: “The prospect of putting off any deal has completely upended market expectations that we were potentially millimetres away from a deal, and also flies in the face of the optimism that has seen markets rally strongly over the last few weeks.”
The FTSE’s falls were compounded by a strong session for the pound, which hits those international firms listed on the index.
Sterling rose 0.5% to 1.30 US dollars and 0.4% to 1.17 euros as the latest Kantar poll put the Tories 12 points ahead of Labour, in contrast to many other surveys showing a dwindling Conservative lead.
Among stocks, miners were among those leading the session’s declines, with Evraz off 7% or 27.7p to 345.4p, followed not far behind by Glencore with a 9.2p drop to 235.7p.
Elsewhere, Cineworld was left nursing share losses after it warned the group is expected to trade below expectations for the year, despite increasing savings from its takeover of US rival Regal.
Total sales in the 11 months to December 1 fell 9.7%, including a 13.9% drop at the US box office and 12.7% decline in the UK and Ireland.
Shares in the group closed 4% down, off 8p to 198p.
But London-listed gold miner Centamin surged 15% in the FTSE 250 Index, up 16.6p to 128.8p after news it had turned down a 1.9 billion dollar (£1.5 billion) takeover offer from its Canadian rival Endeavour Mining.
The all-share offer would benefit Endeavour’s shareholders more than Centamin’s, the board said, and did not “adequately reflect the contribution that Centamin would make to the merged entity”.
Back in the top flight, plumbing giant Ferguson was 3% or 184p down at 6474p, despite posting a 9% rise in first quarter profits as its US arm continued to offset woes in the UK.
The biggest risers on the FTSE 100 were Fresnillo up 11.2p to 582.6p, Polymetal International up 21.5p to 1,192p, British Land up 5.2p to 571.6p, Halma up 18p to 2,114p, and Severn Trent up 11p to 2,211p.
The biggest fallers were Evraz down 27.7p to 345.4p, InterContinental Hotels down 195p to 4,767p, Carnival down 124p to 3,108p, Glencore down 9.15p to 235.65p, and Prudential down 49.5p to 1,300.5p.