In a tumultuous session, the index fell as much as 5.6 per cent as dealers capitulated following sharp falls on Asian markets overnight. This is just short of the 5.7 per cent fall at the close on September 11 2001.
London’s benchmark index was closed down 5.5 per cent at 5,578.2, a loss of 323½ points.
The slump had began in Asia as investors were left underwhelmed by US President George W. Bush’s package of measures aimed at stimulating the US economy. Hong Kong’s Hang Seng index tumbled 5.5 per cent overnight while the Nikkei 225 in Japan had closed down 3.9 per cent.
Both the Dax in Germany and the CAC-40 in France were down as much as 7 per cent - also the biggest falls since September 11 2001.
The slide in the FTSE 100 extended its run of negative sessions to five in a row, intensifying the index’s worst start to a year since its launch in 1983. At its worst, the FTSE 100 closed about 70 points short of a 20 per cent decline from its July 2007 peak. A 20 per cent decline would take the index inside the technical definition of a bear market.