The FTSE 100 dropped 1.89 per cent today as traders seemed determined to let go any gains made this year.
The index closed at 5519.80 a low not seen since March and before then not experienced since 2005.
Debate is now on whether the bullish fillip since March was a flash in the pan and the markets will return to the downward path seen starting in 2007 or gains will return once banking cold feet and warmed up.
Miners today saw the worst of the action as commodity price fears grew with Eurasian falling 11.93 per cent, Ferrexpo down 8.54 per cent and Kazakhmys dropping 7.98 per cent.
Carphone Warehouse and Next dropped 7.02 per cent and 6.19 per cent respectively.
Ryan Kneale, market analyst BetsForTraders.com, said: "The major European indices were down around two per cent at midday as rumours of more write downs in the banking sector gathered steam.
"Elsewhere previously buoyant commodity stocks have also taken a hit as traders concerned with the inflationary impact of rising commodity prices have begun selling literally everything."
The best of the gains went to pharma giant Reckitt Benckiser- up 2.44 per cent as traders see the firm as better insulated from any further slowdown in the economy than other FTSE constituents.
Real estate company Hammerson rose 1.68 per cent, International Power was up 1.22 per cent and Royal&SunAlliance rise 1.11 per cent. BT Group rose 0.68 per cent.
David Jones, chief market strategist at IG Index, said: "The FTSE 100 is nursing a triple digit loss on the day but is off earlier lows.
"The first half of the day saw the UK stock market fall heavily, back below the 5500 mark on more downbeat news about the economy - which has seemed relentless over the past few weeks.
He added: "Although the last few days have seen some volatile moves for the FTSE, the broad picture is still the same. So far this year, 5300 to 5400 has underpinned weakness twice for the UK index and the big question is whether this is going to be the case once more.
"At the moment, sharp drops are eventually seeing the buyers return but with the Dow Jones index already nudging fresh lows for the year to date, we should not take it for granted that a rally from these levels is a sure thing."