A key barometer of world trade has crashed to a record low in a worrying sign the global economy is grinding to a halt.

The so-called Baltic Dry Index, which measures the cost of shipping raw materials such as coal, iron ore and grain, has fallen nearly 70 per cent since August to its lowest level since its introduction in 1985.

The slump – which analysts said showed ‘global trade is really suffering’ as the outlook worldwide darkens – fuelled fears that the economy is heading for the rocks.

It came on another bruising day for investors as worries about China and the rest of the world sent the price of shares, oil and other commodities sharply lower.

The FTSE 100 index fell 114.13 points or nearly 2 per cent to 5804.10 – its lowest level since late 2012.

Britain’s blue-chip benchmark has now lost 7 per cent of its value, or £113bn, in the first two weeks of 2016, hitting savers with pensions and other investments tied up in shares. The losses in London followed a slide of more than 3 per cent on the stock market in China and were echoed around the world.

Asian stocks slumped to three-and-a-half-year lows as the Hang Seng fell 1.5 per cent in Hong Kong and the Nikkei sipped 0.5 per cent in Japan.

In Europe, the stock market in Frankfurt was down 2.5 per cent while Paris lost 2.4 per cent, Milan 3.1 per cent and Madrid 2.8 per cent.

On Wall Street, the Dow Jones Industrial Average was also down nearly 500 points or 3 per cent in early trading, with some £4trillion wiped off the value of global stock markets so far this year.

John Plassard, senior equity sales trader at Mirabaud Securities in Geneva, said sentiment among investors has gone ‘from bad to terrible’.

Oil dipped below $29 a barrel, a level not seen since 2004, as Iran prepared to flood an already over-supplied market with crude.

Copper – known as ‘Dr Copper’ by traders because it serves as an indicator for the health of the global economy – plummeted to a six-and-a-half-year low.

Analysts at Royal Bank of Scotland this week warned of a ‘cataclysmic year’ and urged investors to ‘sell mostly everything’. Rival banking group Standard Chartered said the price of oil could reach $10 a barrel. ‘It’s been another immensely volatile week,’ said Philip Shaw, chief economist at banking group Investec in London.

The Baltic Dry Index has fallen from 1,222 in August to 383.

The dramatic decline in the cost of shipping raw materials around the world is partly down to a shipbuilding boom that has increased the supply of vessels available to transport goods. Chinese shipyards reported a 59 per cent decline in orders in the first 11 months of last year as demand for new ships dwindled.

But the fall in the Baltic Dry Index has also been driven by a slump in world trade, with major exporting nations such as the United States, China and South Korea suffering subdued demand for their goods.

Howard Archer, chief European and UK economist at research group IHS Global Insight, said the decline ‘indicates that global trade is really suffering at the moment and further fuels concern that all is not well with the global economy’.

The World Trade Organisation estimates that 2015 was the fourth consecutive year that annual trade grew by less than 3 per cent and the fourth year in a row that it has grown by around the same amount as the global economy. During the 1990s and early 2000s trade grew at twice the pace of total economic output around the world.