London share prices plummeted today as global stock markets were routed again amid fears of a financial crunch in China.

Analysts talked of 'panic mode' as the FTSE 100 index of leading shares plunged 180.2 points to close at 6,187.65, a fall of 2.8 per cent. The day's deficit was widened by a negative start on Wall Street, where the Dow Jones industrial average followed up yesterday's 2 per cent fall with a drop of 289.6 points or 1.7 per cent to 16,701.1.

The Footsie ends this week nearly 6 per cent lower than it finished last Friday, making it the worst week since last December, wiping around £80billion off the value of London's top 100 listed companies.

That sinking feeling: The FTSE 100 has plunged from its record high in spring to its lowest level this year - with much of the losses coming in the past two weeks

Global investors have been spooked by an overnight survey that showed factory production in China has contracted at its fastest pace since 2009. That sent Shanghai stocks sliding nearly 5 per cent - and the ramifications were felt in Europe today.

Jittery investors also had to absorb the resignation of Alexander Tsipras, which left Greece facing a snap election and further political uncertainty.

'Global markets are in panic mode as the full scale of China's slowdown becomes clearer,' Angus Nicholson, market analyst at IG, said in a note.

'The word on everyone's lips is deflation - poison for equity markets. The phenomenal six-year bull market may finally meet its match in China-induced global deflation.'

The pound was also sold off, falling nearly 2 cents against the euro from an opening mark of €1.398 to €1.381.

China's factory sector shrank at its fastest pace in almost six and a half years in August as domestic and export demand dwindled. Coming on the heels of weaker-than-expected data in July, it stoked fears of a major slowdown in the world's second-biggest economy.

The French and German stock markets were also down 1.3-1.5 per cent, un-nerved more by the gloom in Asia than by the expected exit of Mr Tsipras, which paves the way for a re-election of his Syriza party, purged of radical leftists who object to his deal with eurozone and IMF creditors.

Oil has also crashed to its lowest level since March 2009, during the depths of the Great Recession, hitting $45.77 a barrel before recovering. The world oil prices is on track for its longest losing streak since 1986, when OPEC ramped up production and sent it as low as $10 a barrel.

The FTSE 100 index is now at eight-month lows, with losses since its record high four months ago standing at £200billion, or 11 per cent. That means it has entered a ‘technical correction’ - when a market falls 10 per cent or more from its recent peak. A ‘bear market’ is called when an index is down 20 per cent.

Maike Currie at Fidelity Personal Investing said that while this would spook some investors, 'It is important to remember that the FTSE 100 is not a reflection of the domestic economy, but rather a reflection of a handful of sectors like mining, oil and gas which account for about a quarter of the value of the index and they have performed poorly as commodity prices have plummeted.

'We have enjoyed a bull market for a number of years now, and as bull markets mature, volatility tends to rise. With the world’s largest economy, the US, moving towards an interest rate rise, choppier market conditions were always on the cards as investor angst mounts and many choose to cash in.'

Economic output in China rose 7.4 per cent last year – its slowest pace in 24 years – and Beijing looks set to miss its full-year growth target of ‘around 7 per cent’ this year.

The Chinese government is also struggling to restore calm to Chinese stock markets with the main index in Shanghai down nearly 30 per cent since June.

Analysts said there have been winners and losers on the UK stock market this year, with housing and construction stocks among the best performers.

The slump in the oil price – from around $115 a barrel last summer – has hit operators in the North Sea while the meltdown on the commodity markets has seen the price of metals plunge, hurting mining stocks.

'Copper is being crushed under the weight of the depressing manufacturing numbers from China,' said David Madden, market analyst at IG, 'and Beijing must go back to the drawing board and come up with an even more vigorous plan to keep the economy growing at a high rate.'