Global shares lurched backwards amid fears that US President Donald Trump's economic stimulus may be smaller and take a lot longer to deliver than traders were betting on.
The FTSE 100 Index was 63.7 points lower at 7314.7 in afternoon trading, following a 2% overnight tumble in Japan's Nikkei and a 1% fall for New York's S&P 500 in the previous session. The FTSE 250 was down 201 points down at 18787.
Germany's DAX and the Cac 40 in France were also lower.
Markets had been rising since Trump's shock election win in November, on promises of deep tax cuts and a $1trn infrastructure programme. This had become known as the Trump bump.
But a recent Bank of America Merrill Lynch poll that found 34% of investors believed shares were the most overvalued of all asset types.
That was the highest proportion in 17 years, with US stocks identified as the most expensive.
The losses were prompted by investors dumping risky assets and shifting over to safe havens such as gold and bonds – parcels of government debt.
In London most sectors were down, with only miners making any real gains.
CMC Markets chief market analyst Michael Hewson said: "The question being asked is whether the scales are starting to fall away from investor's eyes as to whether President Trump will be able to deliver anything close to what has been priced into markets since his election last November.
"Even the mistiest eyed optimist appears to be coming to the realisation that even on health care where there is some form of consensus, that reforms are likely to take a lot longer than realised and as such any other programmes like tax and banking reform and infrastructure spending are likely to get pushed further out into the future."
The biggest afternoon risers in the FTSE 100 Index were Fresnillo (+26p to 1579p), Randgold Resources (+115p to 7310p), Antofagasta (+6.5p to 836p), BT Group (+2.3p to 329.4p) and Severn Trent (+13p to 2417p).
The biggest afternoon fallers in the FTSE 100 Index were Kingfisher (-17.6p to 328p), Standard Life (-10.3p to 356.1p), Barclays (-6.2p to 223.8p), Bunzl (-62p to 2303p) and Prudential (-45.5p to 1713.5p).
The biggest afternoon risers in the FTSE 250 Index were Softcat (+19p to 366.5p), Hochschild Mining (+12.5p to 287.5p), Ferrexpo (+6.1p to 169.1p), Polymetal International (+30p to 1039p) and HICL Infrastructure (+3.3p to 165.5p).
The biggest afternoon fallers in the FTSE 250 Index were RPC Group (-33.5p to 877.5p), Allied Minds (-13p to 346.2p), Berendsen (-28.5p to 784p), Spectris (-85p to 2421p) and Aggreko (-30p to 884p).