The FTSE 100 has hit its lowest point in three and a half years, down 130 points on opening.
European stocks are all the slide again after a difficult day's trading in Asia, which saw Hong Kong rapidly catch up with the global sell-off after the Lunar New Year holiday.
The FTSE 100 was down 2.3 per cent, the German DAX was down 3 per cent and France's CAC 40 was down 3.4 per cent.
That followed a nasty session in Hong Kong on Thursday when traders returned to their desks from the Lunar New Year holiday.
In the worst start to the Lunar New Year since 1994, Hong Kong stocks plunged 4 per cent lower to 18,535 points.
The South Korean Kospi slipped down 2.9 per cent to close at 1,861.54.
Mining stocks led the losses in London. Rio Tinto shares lost 6.7 per cent of their value after the company said it was abandoning its "progressive dividend", which guarantees shareholders more cash in future years.
Gold and currencies rallied as investors looked for "safe havens" for their cash.The gold price rose to $1,211 per ounce, it's highest since May 2015.
Analysts said the sell-off on Thursday came after Janet Yellen, Federal Reserve chair, gave a dovish speech to Congress on Wednesday, accepting that there had been a marked deterioration in the global economic and financial outlook since December.
"The weakness stems from Fed chair Janet Yellen warning on current financial market turbulence and suggesting further rate hikes could be delayed, which added to already raised anxiety about the health of the global economy to hold back risk sentiment," said Mike van Dulken, head of research at Accendo Markets.
