The FTSE 100 Index was 124 points lower at 5526 in early trading amid speculation 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.
Wall Street's Do Jones Industrial Average was also 1% lower as the yield on 10-year Spanish bonds rose to a euro-era high of 7.5% in a sign that investor confidence in the country's ability to control its finances is increasingly waning.
Vincent Forest, economist at the Economist Intelligence Unit, said: "It is now clear that Spain has entered a self-defeating cycle of austerity and economic contraction."
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The suspect, 35-year-old Willie Corey Godbolt, has been arrested and was being treated for a gunshot wound in hospital.
Mohanna Abdhou, known as Montana, was out with friends when two attackers cycled up to them and opened fire in Brent, north-west London.
The US president tweeted that Mrs May gave him "full details" of the incident during talks while he attended summits in Europe.