Billions of pounds were wiped off the value of luxury stocks, including British fashion house Burberry.
Shares in the sector tumbled after French giant Kering warned that sales of Gucci, its biggest brand, fell by around 20 percent in the first quarter of the year.
The total turnover of the company, whose labels also include Yves Saint Laurent and Balenciaga, is heading for a decline of 10 percent over the past three months.
“This mainly reflects a steeper sales decline at Gucci,” Kering said, fueling fears about subdued demand for expensive goods such as handbags and jackets in China. Kering fell by 11.9 percent in Paris.
The defeat was echoed across the sector, with Burberry down 3.3 percent (40.5 pence) to 1,189.5 pence in London, while Louis Vuitton owner LVMH fell 1.6 percent in Paris and Cartier parent Richemont in Zurich lost 2.2 percent.
Fashion fail: British fashion house Burberry fell 3.3% after French giant Kering warned that sales at Gucci fell by around 20% in the first quarter of the year
At one point the slump had wiped out almost £25 billion of value from a sector reeling after a profit warning from Burberry in January amid a slowdown in luxury demand.
Florian Ielpo, head of macro research at Lombard Odier Asset Management, warned that the sector is “beginning to expose fractures”, adding: “The underlying factor is the uncertain state of the Chinese consumer.”
Analysts at Vital Knowledge said: ‘This will raise further concerns about the state of consumer spending and the Chinese economy.’
The FTSE 100 fell 0.01 percent, or 0.92 points, to 7,737.38, while the FTSE 250 rose 0.27 percent, or 51.59 points, to 19,484.40.
Stock markets generally struggled to provide direction ahead of last night’s US Federal Reserve meeting, where the world’s most powerful central bank was expected to leave interest rates unchanged again.
Attention today will turn to the Bank of England, which is expected to keep interest rates at a 16-year high of 5.25 percent despite a fall in inflation to 3.4 percent in February.
In London, Rolls-Royce rose 1.5 percent, or 6 pence, to 406.7 pence, after hitting a record high in the previous session.
The shares have more than quadrupled in value since the beginning of last year.
Close Brothers rose 8.8 percent, or 30.6 pence, to 378 pence, after analysts at Berenberg raised their price target from 425 pence to 470 pence.
It followed a 4 percent gain in the previous session, when it said it would strengthen its finances amid a probe into the auto finance market.
There are fears the scandal, which could see up to seven million people receiving compensation after mis-selling high-priced car loans, will cost the industry billions. Close Brothers is in the line of fire.
Greggs fell 0.4 percent, or 12 cents, to 2,818 percent after it temporarily closed stores as IT problems prevented payments from being accepted.
Johnson Matthey, which makes catalysts and pollution filters, is selling its medical device components business to Montagu Private Equity for £550 million. Shares rose 7.8 percent, or 132.5 pence, to 1,840 pence.
And Investec gained 3.4 percent, or 16.8 pence, to 507.8 pence, after it said it expects profits of between £866.9 million and £909.6 million for the year to the end of March.