The London market fell sharply as mining stocks had their worst day for 20 years and investors faced up to the fact a recession was looming.

The euphoric reaction to Monday’s bank bail-out faded as the FTSE 100 closed 314.6 points, or 7.2 per cent, lower at 4,079 – just 148 points above Friday’s five and-a-half year low. Sentiment was hit by reports of a sharp fall in US retail sales and a sharp rise in UK unemployment. Elsewhere, the FTSE 250 dropped 387.3 points, or 5.5 per cent, to 6,707.1.