As traders sold off shares in favour of safer assets such as gold, the FTSE 100 in London fell 1.14% to close at 5260.19, its lowest level since 25 November last year. European markets also ended sharply lower, with Germany's Dax down nearly 3.5%, France's Cac down 2.2% and Spain's Ibex off by 0.4%. In the US, the Dow Jones industrial average had fallen more than 220 points - or 1.8% - by the time London closed. After overnight falls in Asia following signs of a slowdown in China, the MSCI world index hit its lowest level since December.
The day's economic data went from bad to worse, with the eurozone manufacturing sector suffering its worst month since June 2009 and its jobless rate hitting a record high of 11%. In the UK the manufacturing sector sufferered its second-biggest fall in 20 years, according to the latest purchasing managers' index.
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