FTSE 100 down 2% on Chinese woes

(Close): London's leading shares closed down 2% on Thursday after Chinese shares slumped more than 7% for the second time this week.

The benchmark FTSE 100 index fell 119.30 points to 5,954.08.

Mining stocks dominated the FTSE 100 losers' list, led by Anglo American, which nosedived 11%.

The oil price fell sharply in morning trading, with Brent crude down 3%, but it recovered to $34.13 a barrel, almost unchanged on the day.

Tensions between Saudi Arabia and Iran have been sending oil to lows not seen for more than a decade.

Other European stock markets fared even worse than London. The Paris Cac 40 index fell 1.7% and Frankfurt's Dax was down 2.3%.

Other mining firms showing big losses on the FTSE included Glencore, which dropped 8.3%, BHP Billiton, which was 5% lower, and Antofagasta, which shed 5.3%.

Investors fear that China's economic woes will slow global demand for minerals and other commodities.

On the currency markets, the pound fell by more than one-and-a-half cents against the euro, sliding 1.2% to €1.3407. Sterling also slipped by 0.5% against the dollar to $1.4563.

"The pound has weakened as expectations of a Bank of England interest rate hike any time soon have waned and there has also been a mounting market focus on the UK's referendum on EU membership," said Howard Archer, chief UK and European economist at IHS Global Insight.

"Expectations of an interest rate hike have been pushed back by recent mixed UK economic data, a relapse in earnings growth and the likelihood that inflation will stay lower for longer, due to oil prices falling to new lows."