Global falls in technology and telecom stocks sparked panic that stripped more than £30 billion off the value of Britain's top 100 companies yesterday.
The stocks fall began after leading tech firms downgraded their profits estimates. Many analysts now believe the tech-stock shake-up has bottomed out.
In London, the Techmark 100 ended 178.7 (5.2 per cent) lower at 3,440.11, and the FTSE 100 closed 130.1 (2.1 per cent) down at 6,117.6 - its lowest point since May.
American technology stocks were hit particularly hard, with the Nasdaq index closing down 72.05 (2.2 per cent) at 3,168.49 - less than four points above its lowest of the year.
The Dow Jones industrial average closed down 110.61 (1.05 per cent) at 10,413.79, its lowest level since June.
Even healthy results from chip specialist Arm Holdings failed to steady the market, as the firm's stock fell 16 pence, closing at 670p.
A profits downgrade late on Tuesday in the US by telecoms-equipment maker Lucent Technologies hit chip-makers, software firms, Internet service providers and telecoms equipment companies.
Motorola, which announced healthy quarterly results yesterday, still lost 19 per cent to $21.44, while Yahoo, which had posted better-than-expected third-quarter results, still lost 21 per cent, to close at $65.4.
Brian Kirkpatrick, a money manager with Nebraska-based Bridges Investment, which oversees $1.3 billion in assets, told BBC Online: “Everyone is looking for the leaders like Cisco Systems to be hammered with everybody else.”