The index of leading UK shares has fallen to its lowest level for more than a month as worries about the state of the global economy persist. The FTSE 100 index fell 67.3 points, or 1.7%, to 3,963.9 - the first time the market has closed below the 4,000 level since 27 May.
The market was knocked by weaker-than-expected US manufacturing figures, which raised worries about the strength of the world's largest economy.
Despite the drop, analysts said they did not expect the FTSE to fall significantly further.
'A healthy correction'
Tuesday's fall comes after the market has seen big gains over the April to June period.
The FTSE 100 was pulled lower in afternoon trade after the US Institute for Supply Management released figures which showed that the US manufacturing sector was still shrinking.
 This is a healthy correction and people should not panic  John Smith, Solus Fund Managers |
Most of the FTSE 100 shares were dragged back, with financial stocks most out of favour.
Barclays dropped 2.7% to 437.75p while HBOS fell 12.5p to 772p.
One of the few gainers was hotels group InterContinental. Its shares rose 2.4% to 440.25p after it said it had sold 16 US hotels for $185m.
Analysts said people should not be too worried by the falls of the past few days.
"Clearly it won't be plain sailing from here on... but this is a healthy correction and people should not panic and think the bear market is starting again," said John Smith, chief investment officer at Solus Fund Managers.
The market received a vote of confidence from directories business Yell, after the firm announced it was planning to list its shares in what will be the largest flotation in London so far this year.
Yell said its shares would cost between 250p and 300p each, giving the total group a market capitalisation of between �1.76bn and �2.11bn - making it large enough to be a candidate for the FTSE 100 list of top companies.
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