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Global Growth Fears Prompt FTSE 100 Plunge

The FTSE 100 share index has fallen sharply as fears about the health of the global economy return to spook investors.

By the close of trading, it had lost 2.7% - wiping £41bn from the value of the UK's 100 biggest listed companies.

Banking stocks were in focus over fears that big loans to the struggling mining and commodity sectors could go bad.

Lenders are also looking less likely to cash in on increases in interest rates as the global economic gloom leaves central banks in the UK, Europe and Japan in cautious mood.

There is also concern that the central banks have no room to take additional stimulus measures in the face of a fresh economic crisis.

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Shares (Berlin: DI6.BE - news) in Barclays (LSE: BARC.L - news) were briefly suspended following volatility in its share price as it dived by 8%. The stock closed 5.3% lower.

HSBC fell 4.2% with state-backed Royal Bank of Scotland (LSE: RBS.L - news) down 4.6% and Lloyds off by 4%.

Elsewhere, Germany's Deutsche Bank (Other OTC: DBAGF - news) showed the starkest weakness as it closed 9.5% lower. In the US, Goldman Sachs (NYSE: GS - news) was down by around 5%.

:: FTSE 100 Endures Its Worst Start To A Year

Global markets have had a turbulent start to the year - amid the collapse in the oil price and a slowdown in the Chinese economy - with sharp falls at the start of January followed by a partial recovery at the end of the month.

There has been little respite from the rollercoaster ride this month with another queasy period facing investors as February gets under way.

Laith Khalaf, senior analyst at Hargreaves Lansdown stockbrokers, said: "Monday was as grisly on the markets as it was on the rain drenched streets of the UK.

"Markets are clearly worried about a global economic downturn at a time when central banks have little dry powder left to fight off recessionary forces.

"Financials have been really badly hit of late, and in a sign of how dire things have got, some European banks are trading lower than they did during the depths of the financial crisis.

"There doesn't seem to be much justification for such a dismal outlook, but markets appear to be stuck in a negative feedback loop at the moment."

There was also weakness in the tech sector - in the wake of the recent disappointing results from US giant Apple (Swiss: AAPL.SW - news) - with London-listed ARM Holdings (LSE: ARM.L - news) down 6.4%.

Meanwhile, UK gilts - the 10-year government bond to which money moves when equities come under pressure - performed strongly, prompting yields to fall to their lowest level since March last year.

Gilts are seen as safe havens at times of market volatility. When the parcels of Government debt are in demand it effectively means that UK borrowing is cheaper.

The top FTSE 100 riser was Randgold, the gold miner, which not only benefited from strong annual results but also from the metal's status as a safe haven asset class. Shares rocketed by 13%.

All of the major European bourses were lower for a sixth consecutive trading session, with Greece's stock market falling to its lowest level since 1990.

Germany's Dax and France's Cac 40 each dipped by more than 3% while on Wall Street the S&P 500 was more than 1% lower.