The FTSE 100 has fallen almost 3 per cent at close to stand at 5,544.22
The blue-chip index was down 158 points, a fall of 2.77 per cent, with banks and miners leading the fall.
Markets across Europe have also fallen with the French Cac 40 and the German Dax both down 3.2 per cent.
Kathleen Brooks, research director UK Europe, Middle East and Africa at Forex.com, says stocks have been weaker on a mixture of news throughout the day.
Brooks says the effect of MF Global on financial stocks, the ongoing European debt crisis and the strong rally during October could have led to profit taking.
She says: “We think that the markets may be in consolidation mode for the rest of the day, as we wait for the G20, European Central Bank meeting, Fed meeting and payrolls along with a raft of economic data that is being released later this week.”