US Fed threat to cut emergency cash support sparks stock sell-off US threatens to start winding up massive stimulus programme London's FTSE 100 index plunges 2% from recent 13-year highs Japan's Nikkei takes a brutal 7.3% hit overnight By Tanya Jefferies and Daily Mail Reporter The global market rally crashed to a halt today as the US Federal Reserve suggested it could soon stop throwing so much cash at its economy. The threat to start winding up the massive US stimulus programme, which has helped fuel stellar market gains across the world, sent London's FTSE 100 index plunging more than 2 per cent from recent 13-year highs for its worst one day fall in a year. The blue chip index closed 143.48 points, or 2.1 per cent, lower to 6,696.79, retreating from Wednesday's 13-year peak of 6,875.62 and suffering its biggest one-day drop since last May. Spooked: Traders are worried the US Fed could soon start scaling back emergency economic support Fed chairman Ben Bernanke said late on Wednesday the central bank could scale back quantitative easing in coming months if economic momentum was maintained, thus threatening the removal of the stimulus which has been a key driver of the year-long equity market rally. News of a slowdown in factory activity in China, a top market for Britain's heavyweight miners, gave investors a further excuse to take profits. Essential investing news and tips There was little good news from the US either as shares on Wall Street opened mixed on economic data which showed a slowdown in manufacturing output in the world's largest economy in May. That helped to offset a decrease in the number of people claiming unemployment benefit in the week to May 18. Germany's DAX and France's CAC 40 also both closed more down by more than 2 per cent but Japan's Nikkei took a more brutal 7 per cent hit. After a volatile session, the Dow Jones in the US closed down 80.4 points at 15,307.2 last night. The pound has failed to recover yesterday's losses as a sharp fall in High Street sales dented hopes Britain is on the road to a steady recovery. Sterling is at €1.1697 against the euro and $1.5049 against the US dollar this morning. 'Equity investors have had a fantastic run this year - it has been hugely profitable and "seemingly" risk-free...until now that is,' said a spokesman from Capital Spreads. Despite the world economy still being far from rosy, company valuations have soared to unseen levels. They have benefited from huge injections of cash into the financial bloodstream and low rates of borrowing, not to forget that there is nowhere else to put it - commodities, bonds, who would invest in those at the moment? 'However, after the see-saw trading session seen yesterday fuelled exclusively by comments and minutes released by the Federal bank and its members, it just goes to show the importance of this central bank stimulus, and a stark reminder that this better environment for corporates is a temporary measure - it won't last forever.' Matt Basi, head of UK sales trading at CMC Markets, said: 'Equity markets are taking a well-earned breather this morning after the latest Fed minutes sparked speculation that Chairman Bernanke's asset purchase programme could dry up as soon as June of this year - though earlier assurances from the Fed chief suggested the taps will be left on whilst the recovery remains fragile. In this context, the panic selling evident in Asia overnight looks completely overdone, with trading halts triggered as the Nikkei plunged over 7 per cent. 'Obviously weak data from China overnight didn't help sentiment in the short term, but markets sent a very clear message to central bankers last night that if the free bar closes, everyone's going home.' Market watch: Nikkei suffered dramatic plunge in its value during last trading session (Graph source: Yahoo!)