The benchmark share index plummeted by 3.15 percent during today’s trading, closing down 217 points. Nearly every company on the FTSE suffered losses as a global sell-off continued after the arrest of a top executive from Chinese technology giant Huawei sparked fears of an escalation in the US-China trade war. The sharp drop is the biggest one-day loss since June 24, 2016 – a day after the Brexit vote – which also saw the FTSE fall by 3.15 percent.
European stocks were also hammered after starting the day in negative territory, with the German DAX falling 3.48 percent and the French CAC 40 closing down 3.31 percent.
Meanwhile, the Stoxx 600 index, which includes Europe’s biggest stocks, closed down 3.3 percent.
Analysts and traders had hoped that talks between US President Donald Trump and Chinese premier Xi Jinping would cool the trade war between the world’s biggest economies.
But after the pair met at the G20 on December 1, conflicting messages from Mr Trump over exactly what had been agreed sent markets sliding.
However a 90-day truce on the tit-for-tat trade war between the two superpowers promised to provide markets with some short term stability.
But it has since emerged that on the day the leaders talked trade in Argentina, the chief financial officer and deputy chairman of Huawei was arrested in Canada at the request of the US.
Meng Wanzhou is facing extradition to the United States on charges which are said to relate to US sanctions.
Huawei is the world’s second biggest smartphone manufacturer and is involved with major telecoms projects around the globe.
Connor Campbell, an analysts at Spreadex, wrote: “The Huawei arrest appears to be the straw that broke the camel’s back.
“The rapidly dwindling good-feeling towards the US and China’s vague trade war ceasefire turned actively hostile on Thursday, investors fearing that, 90-day truce or not, the relationship between the two superpowers might be about to take a turn for the worse.”
Meanwhile in the US, the S&P 500 and the Dow Jones slipped back to losses for the year today.
Both indexes were down more than 1.5 percent, tracking 0.4 percent losses for the year despite coming well off their session lows.
Massud Ghaussy, senior analyst at Nasdaq IR Intelligence in New York, said: “Markets are extremely sensitive to any news regarding trade. The potential slowdown in global growth is also something the markets are pricing in.”