Around £64bn was wiped off the value of the UK's biggest companies as renewed fears over the world economy sent shares sliding around the globe.

During a nervy and dramatic day's trading in London, the FTSE 100 index tumbled 246 points, or 4.67%, to close at 5041. This is the blue-chip index's worst daily fall in percentage terms since March 2009, and its biggest points fall since November 2008 in the aftermath of the collapse of Lehman Brothers.

Markets across Europe shared the gloom, with the German Dax losing 4.9% and France's Cac falling by 5.2%. Wall Street was also bathed in red, with the Dow Jones down 444 points, or 3.99%, by early afternoon in New York.

The rout began at the start of trading, triggered by a warning from the US Federal Reserve that there were "significant downside risks" to the American economy. Financial markets continued to be hit by bad economic news throughout Thursday, including disappointing manufacturing data from China and alarming evidence that Europe's private sector was shrinking, dragging the region back towards recession.

Giles Watts, head of equities at City Index, said the selloff was driven by "the sheer weight of evidence pointing towards a sharp slowdown in global activity", making a new recession more likely.

"All of the negative news has just culminated into a scenario whereby investors are asking themselves whether they really should be putting their money in risky stocks or defensive safe havens. Today's markets show the answer has firmly been the latter of those two options," he said.

An appeal from Christine Lagarde, head of the IMF, for world leaders to unite did not restore confidence in the City.

Every stock fell on the FTSE 100, with mining companies such as Vedanta, Antofagasta and Kazakhmys all suffering double-digit declines. Bank shares were also in retreat across Europe, amid calls for financial firms to bolster their balance sheets with fresh capital to cope with impending losses from the eurozone debt crisis.

"Last night's gloomy outlook from the Fed saw market sentiment take a battering right from the open, while disappointing PMI figures from China have done little to lighten the mood, particularly in the resource sector," said Ben Critchley of IG Index.

Louise Cooper, markets analyst at BGC Partners, said traders were deeply fearful about the prospects for the world economy. "The future is so uncertain – the world could look significantly different in a month's time. Greece could have defaulted, we could be in the middle of a banking crisis, a bank could have even gone bust," Cooper said.

Baudouin Prot, the head of BNP Paribas, went on a media offensive on Thursday to deny reports that his bank would be seeking a lifeline from Qatar.