A whopping £30bn was wiped off FTSE 100 on the first trading day of 2016 after the index tumbled by more than 2% to 6,113.88 in early trade.
The big tumble was caused by losses in China after markets fell 7%.
Another big factor behind the drop was manufacturing performance.
The Caixin/Markit manufacturing purchasing managers’ index (PMI) dropped to 48.2 in December. This was the 10th consecutive month of weak factory activity in China.
Shares in London mining companies Anglo American fell 7% while Glencore was 5.9% lower. These companies were affected as China is a major importer of raw materials.
Mike van Dulken, of Accendo Markets, said: “The negative opening call comes courtesy of a poor start to the new year in Asia after China Manufacturing PMI contraction worsened, missing expectations for a slight improvement and adding to 2015’s fears of a slowing economy and to calls for more stimulus from Beijing.”