LONDON, Aug 18 (KUNA) -- London's leading share index plunged more than 2% Wednesday as fears over global economic growth and the eurozone debt crisis continued to trouble traders. The FTSE 100 Index slumped 120 points at one stage, while commodity prices also suffered with Brent crude oil in London down more than 1% to 109.2 US dollars a barrel. The most recent slump was sparked by fears that China's central bank is set to raise interest rates - a move that would hit demand in the world's second largest economy. But analysts said the fall-out from recent economic developments in Europe, such as weak GDP data in France and Germany, and in the US, following disappointing growth figures and a shock credit rating downgrade, was continuing to damage confidence. World markets have endured wild swings in recent weeks sparked by concerns over US economic health, sovereign debt fears and rumours over the financial position of several of France's leading banks. The weak session in the UK, spurred on by poor retail sales figures for July, followed a mediocre session on Asian and US markets. Retail sales volumes in the UK grew by a lacklustre 0.2% in July, compared with 0.8% growth in June, which came after yesterday's bleak sales outlook from computer maker Dell. Economists at investment bank Morgan Stanley downgraded their forecast for global economic growth to 3.9% from 4.2% in 2011 and to 3.8% from 4.5% in 2012. The bank also downgraded its 2012 forecast for the UK to 1.4% from 1.8% as a result of the slowdown in global growth and the weak performance in the US and EU economies. The UK forecast for 2011 was held at 1.2%. Morgan Stanley analyst Joachim Fels said growth in emerging markets, which drive global growth, is not expected to be as aggressive as previously thought. The UK reported a sluggish 0.2% growth rate between April and June and the US was shaken by an unexpectedly low growth of 1.3% at an annualised rate in the same period. Meanwhile, in Europe, the cost of borrowing for governments such as Italy and Spain has risen, signifying a lack of confidence in the countries' public finances. Traders were left disappointed yesterday when French president Nicolas Sarkozy and German chancellor Angela Merkel failed to back proposals to issue eurozone bonds to tackle the region's debt crisis.