The FTSE 100 Index fell 117.9 points, or 2.1%, to 5533.9 amid worries that a raft of Spanish regions were poised to ask for government bailout funds, increasing the likelihood that the country itself will turn to the EU for help.
The fall wiped nearly £30 billion from the value of London's leading shares index, with all 100 companies losing value and banks falling up to 4%.
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An ejector seat manufacturer has admitted breaching health and safety law over the death of a Red Arrows pilot.
Tributes have been pouring in to "happy, smiling" schoolgirl Mylee Billingham after the eight-year-old was killed at the weekend.
Former England and Blackpool defender Jimmy Armfield has died aged 82 following a long battle with cancer, his family have confirmed.