FTSE falls 1.8 percent on commodities and banks
FTSE gains as metals spur minersBanks were the another standout loser, with Barclays, Royal Bank of Scotland, HBOS, Lloyds TSB and Standard Chartered losing between 1.9 and 2.9 percent.
HSBC bucked the weak trend in the sector, rising 0.7 percent.
U.S. stocks fell sharply overnight as credit concerns hounded financial stocks while global growth worries hurt big technology and industrial companies. In Asia, Japan's Nikkei average .N225 lost 0.8 percent.
JPMorgan Chase said the market value of its investments in Fannie Mae and Freddie Mac preferred stock has dropped by half to $600 million this quarter.
U.S. new home sales data for July and consumer confidence for August, both due at 1400 GMT, will provide further clues to the state of the world's largest economy.
Mid-cap Bovis Homes sagged 3.2 percent after the housebuilder reported a slump in first-half profit following what it called the toughest period of trading in its life as a public company.
Other housebuilders also fell, with Taylor Wimpey losing 5.5 percent, Persimmon easing 4.2 percent and Barratt Developments dropping 4.1 percent.
Bank of England Deputy Governor Charles Bean warned on Monday that the global economic slowdown was likely to "drag on for some considerable time".
Meanwhile, a survey by the Confederation of British Industry showed profitability and optimism in British's dominant services sector deteriorated sharply in the three months to August.
The International Monetary Fund has trimmed its forecasts for world economic growth in 2008 and 2009, largely due to a marked worsening in the outlook for the euro zone, a G20 finance official told Reuters on Monday.
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