The FTSE 100 ended the day down 0.99 per cent – or 42.69 points to 4.287.97
Over the day the index dropped to just over the 4,200 mark as oil and commodity prices fell.
Oil prices fell below $34 a barrel for the first time in four years – despite Opec members pledging yesterday to cut production.
But afternoon trading was buoyed as President Bush announced a short-term loan rescue package for the US car industry.
In New York the Dow Jones was up 0.94 per cent to 8,685.99 at 11:39 EST (16:39 GMT)
Commodity stocks dominated the drops in London, but insurers aided the recovery.
Ryan Kneale, market analyst at BetsForTraders.com, said: "Oil and metal prices are in free fall and this is having a very negative effect on energy and mining stocks, which continue to plummet.
"The sheer weighting of these stocks in the major indices is causing the FTSE in particular to struggle, and with earnings estimates being cut in just about every sector, there is very little for traders to be positive about."
On the markets, Xstrata was down 13.19 per cent, Anglo American fell 10.55 per cent, Vedanta Resources dropped 9.70 per cent and Antofagasta was down 7.66 per cent.
Schroders NV Non Voting was down 8.74 per cent.
On the upside, Old Mutual and Royal&SunAlliance rose 9.45 per cent and 8.53 per cent, while Tesco gained 4.84 per cent.
Johnson Matthey rose 4.80 per cent and Schroders gained 4.43 per cent.
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