Panicking traders wiped almost £40bn off the value of Britain's blue chip companies and markets plunged around the world as a second wave of Covid sent Europe careening back towards lockdown.
The FTSE 100 closed 2.5pc or almost 150 points lower at 5,582, its lowest level since early April. Shares fell in 98 of the index's 100 firms as all industries were swept up in the sell-off.
France’s Cac 40 fell 3.4pc and the German Dax sank 4.2pc - the worst declines for Paris and Frankfurt since late September.
Wall Street joined the carnage, with a 3.5pc fall for the S&P 500 - the biggest one-day slide since June - and a similar slide for the Dow Jones Industrial Average to chalk up its worst losing streak since February. The technology-focused Nasdaq index shed 3.7pc.
The US dollar rallied as fear once again gripped traders, prompting a widespread rout that hit mining and financial firms particularly hard.
The pan-European Stoxx 600 index fell 3pc to its lowest level since May, while Brent crude oil sank below $40 a barrel on fears of a further hit to demand as normal life is once again put on hold.
Investors – who have been on edge for weeks amid a resurgence in case numbers – were pushed into selling in the face of fresh restrictions in France and Germany that are likely to snuff out both nations' economic recoveries.
Uncertainty ahead of the US election and fading hopes for a long-awaited stimulus package to support struggling families compounded fears for the future.
Edward Moya, senior markets analyst at trading firm Oanda, said: “Nothing should compare to the selloff that occurred in the spring, but right now virus concerns, lack of stimulus, and election outcome uncertainty have forced investors to scale down their reopening bets."
In a sign of fraying nerves on both sides of the Atlantic, volatility gauges for European and US stocks rose to their highest level since June, indicating traders expect continued price swings.
The Vix index – which measures market swings and is often called Wall Street’s ‘fear gauge’ – hit its highest level since June.
Gold dropped to a three-week low of $1,873 an ounce, with Ole Hansen of Saxo Bank warning its price had gone “stale” following a string of closes about $1,900 an ounce.
Although the precious metal usually benefits from its status as a safe haven when equities fall, he warned it could be caught up in a “‘dash for cash’ sell-off” if next week’s election results upsets markets.
The fall in gold left miners Fresnillo and Polymetal among the biggest blue-chip fallers. Others to suffer steep share price drops included Natwest and house builder Taylor Wimpey, because property prices and banks are likely to suffer if a fresh downturn takes hold.