The FTSE 100 has slumped to a two-month low after China announced tariffs on the US as tensions between the two global powers continue.
London’s top flight fell by 39.61p to 7,163.68p as any optimism from Friday that the trade spat could be resolved soon quickly evaporated.
Michael Hewson, chief market analyst at CMC Markets UK, said: “Today’s trading activity has had a very ‘risk off’ flavour to it as concerns about further escalations in the China-US trade narrative turned very quickly into reality as China announced a raft of new tariffs on over 2,400 of US goods.
“With the EU also threatening its own retaliation if President Trump implements tariffs on EU autos at the end of this week, stocks have seen valuations put into the paper shredder, with large falls across the board.”
Some of the European markets tumbled more dramatically, with the German index particularly affected amid fears the US will turn its attentions to the EU and place tariffs on the region’s auto industry.
The German Dax fell by 1.52% and the French CAC fell by 1.22%.
Uncertainty has weighed down the pound, which fell 0.48% to 1.295 versus the US dollar and 0.3% to 1.153 versus the euro.
In stocks, British Gas owner Centrica rallied, albeit from a 20-year-low, as its gross revenues rose 54% in the first four months of the year and it kept its full-year outlook for debt and cash flow unchanged.
The energy provider also warned unusually warm weather and a £70 million hit from the energy price cap will impact first half results as it also suffered a further customer exodus.
Its shares rose 2.8p to 95.4p.
Elsewhere, Metro Bank fell to an all-time low as concerned customers rushed to its outlets to withdraw their money.
The furore came as the bank quashed “false rumours on social media” over its financial health and said plans to shore up its finances were well advanced.
Its shares were 58.5p down at 475p.
Vodafone slipped after the Sunday Times reported the mobile operator is set to reverse a pledge to investors and slash its dividend to pay for expensive auctions for mobile phone airwaves in Germany and Italy.
The reports suggest the firm will rein in its full-year payout at its annual results on Tuesday, despite signalling in November it would protect the dividend.
Shares slumped by 7.2p to 131.8p.
Funeral provider Dignity’s shares fell after it warned over the impact of a 22,000 drop in the number of deaths so far in 2019.
Its shares were 15p down at 661p.
In oil, tensions in the Middle East overshadowed the dispute between the US and China as the price of Brent crude oil rose by 0.71% to 70.26 US dollars.
The biggest risers on the FTSE 100 were Centrica, up 2.8p at 95.4p; DS Smith, up 6.8p at 332.8p; Just Eat, up 12.4p at 652.6p, and National Grid, up 14.1p at 849.6p.
The biggest falls on the FTSE 100 were ITV, down 7.55p at 111.8p; Vodafone, down 7.2p at 131.8p; Tui, down 46.8p at 781p, and Evraz, down 30p at 556.4p.