Leading shares recorded their biggest weekly fall for 15 months as a combination of profit warnings, interest rate fears, worries about a slowdown in the eurozone and China, and geopolitical tensions sent investors scurrying for safety.
Despite a slight recovery on Friday, the FTSE 100 finished the week at 6649.39, up 9.68 points on the day but down 188 points or 2.76% on the week. This is the worst weekly performance since June 2013.
Cheap money supplied by central banks has been supporting the market for many months now, and the prospect of a rate rise in both the UK and US is making investors more nervous. The Federal Reserve is set to end its monthly bond buying programme in October, and several Fed members have suggested rates may be raised sooner than the market expects. Positive economic data such as Friday's upgrade to US second quarter GDP from initial estimates of 4.2% growth to 4.6% add to the pressure for an increase in borrowing costs.
In the UK, Bank of England governor Mark Carney also suggested on Thursday that a UK rate rise was getting closer.
But the recovery in the global economy is already fragile and could be thrown off course by dearer borrowing. The latest PMI survey from China this week showed a slight rise in manufacturing in September, but failed to dispel fears about the country's future growth. The outlook for the eurozone was also uncertain, with manufacturers reporting weak orders and German consumer confidence slipping.
Geopolitical tensions did not help, with reports of Russia planning to seize foreign assets in retaliation for sanctions imposed over its actions in Ukraine. On top of that, markets were nervous about the repercussions of the escalating attacks on Isis.
On top of all that, the week saw some shocks in the corporate world. Apple's problems with its supposedly bendy iPhone 6 and a damaging software update saw its shares hit hard.
In the UK, investors were spooked by a series of profit warnings, not least from Tesco. The supermarket lost 0.95p to 191.55p, down more than 16% on the week, after it plunged into turmoil by revealing it had overstated first half profits by £250m.
Tesco's travails hit the whole sector, not helped by J Sainsbury firing the next shot in the grocery price war ahead of what are expected to be poor results next week. Sainsbury fell 7.9p on Friday to 250.1p and Morrisons 3.1p to 171.
Meanwhile Sports Direct International lost another 17p to 620.5p as founder Mike Ashley decided the retailer should take a £43m punt on Tesco shares recovering.
Tate and Lyle also shocked investors with a profit warning, this time due to increased competition for its Splenda sweetener and supply problems after a severe US winter. Its shares plunged to a three year low but edged up 6p to 598.5p on Friday.
Banknote maker De La Rue, down 255p at 504p, waste management group Shanks, which slid 12.75p to 90p, and telecoms equipment firm Filtronic, off 5.25p to 20.5p joined the ranks of those warning of lower profits.
Mining shares had a volatile week, thanks to the concerns about China, a key consumer of commodities. But with investors seeking havens in the uncertainty, gold and silver were in demand, helping Fresnillo climb 13.5p to 761.5p. But Randgold Resources lost 35p to £42.14.
Lloyds Banking Group added 0.46p to 76.66p as it sold 11.5% of its demerged bank TSB at 280p a share to institutional investors, raising £161m. The move leaves Lloyds holding 50% of TSB, ahead of a deadline set by European regulators to dispose of all its shares by the end of 2015. TSB was steady at 280p.
Also unchanged on Friday was Royal Mail at 400p, still its lowest closing level since flotation on growth fears, following a downbeat statement from smaller rival UK Mail.
Finally, a chief executive who quits because he does not like going abroad. Justin Atkinson said he intends to step down from engineering contractor Keller at the end of 2015 because the company had expanded into 40 countries and "this has meant an even increasing amount of overseas travel, which is not something I can continue to commit to." Keller's shares seemed unfazed, up 10.5p at 871p.
