The FTSE 100 looked to be heading for its worst one day fall for a week after tumbling 132 points - or more than 2% - to 6117 by midday.

The index of the UKs biggest companies was a sea of red, with just one company - engineering firm Meggitt - in positive territory.

Tens of billions have been wiped off the value of pensions funds and investments relied upon by millions of Britons since the stock market turmoil began three weeks ago.

The FTSE dived this morning (
Image:
Google Finance)

Markets in Germany and France also fell sharply.

It came amid fresh fears for the Chinese economy, with output in the country’s manufacturing falling at the fastest rate for three years last month. Find out more about what's happening in China here.

The slowdown is set to prompt the International Monetary Fund (IMF) to scale back forecasts for the global economy.

Joshua Mahony, market analyst at online trading firm IG, said: “The importance of today’s announcement is that the slowdown is hitting the larger state-backed firms who typically take longer to feel the pain.

“Chinese markets have started the week just as the past three weeks have begun, with widespread selling and the expectation that the worst may not yet be over.”

What it means for the UK

The FTSE 100's dive may say more about nervous investors than real risks to the UK economy.

Mark Ward, of London-based Sanlam Securities, said: “People are getting back from holidays and trying to make sense of what is going on.

“The China headlines are not helping but I would say it’s probably more down to sentiment than a huge shift in the actual economic outlook.”

Meanwhile IMF managing director Christine Lagarde warned emerging economies like Indonesia to “be vigilant for spillovers” from China’s slowdown.

“Overall, we expect global growth to remain moderate and likely weaker than we anticipated last July,” She said.

Will it affect my money?

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Image:
Getty)

If all your savings are in cash, you're fine - the Government protects up to £85,000 in each cash account you hold.

If you invest in a stocks and shares ISA, or have savings in a pension, chances are the value of your savings pot has dipped today - although if you're invested in different types of assets, some of them may compensate for the loss. You can learn more about the risks of investing here.

But investors have a habit of selling off shares like headless chickens, then taking a deep breath and getting their confidence back.

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Image:
REUTERS)

So if you’re invested in the UK or the US, you’re likely to see the value of your savings pot creep up again in the coming months. And in the long-term, a one-day shock doesn’t matter so much.

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Image:
REUTERS)

On the other hand, if you invested all your money in Chinese shares and you need it back now… Well, good luck with that.