The pan European Stoxx 600 index was down 1.58% in early deals. Britain’s FTSE 100 was 0.8% lower and the pound fell 0.93% against the dollar at 1.11.
In another day of Westminster drama, Truss quit after her disastrous mini-budget crashed financial markets, becoming the shortest-serving prime minister in UK history. The Conservative Party has decided that the new leader must be elected by the end of next week at the latest.
Former finance minister Rishi Sunak, deposed leader - and Truss’s predecessor - Boris Johnson and Penny Morduant have all announced intentions to contest the post.
In economic news, latest official data from the UK showed retail sales tumbled in September, weighed down by soaring prices, the cost-of-living crisis and the state funeral of Queen Elizabeth II.
There was also a steep increase in government borrowing in September. Public sector net borrowing excluding public sector banks (PSNB ex) was £20bn last month, £2.2bn up on the same month a year previously and the second-highest September since records began in 1993.
"The UK has captured the attention of the global investment community of late, although not for the right reasons. The political turmoil, allied to a volte-face around the fiscal event, have served to mar credibility, undermine sterling and send the gilt market into something of a tailspin which would have been more severe without Bank of England intervention,” said Richard Hunter, head of markets at Interactive Investor.
"With the latest figures indicating a drop in retail sales and a further increase in government borrowing, the intense pressure will remain on not just the economy itself, but also for the country as an investment destination which had been showing some signs of life and overseas interest earlier in the year."
In equity news, Adidas (ETR:ADSGN) shares fell 10% as the German sporting goods maker cut its full-year outlook, citing weaker demand. Puma and JD Sports Fashion were down on a readacross.
Renault (EPA:RENA) shares were down, despite the French car maker confirming its full-year outlook and posting a rise in quarterly sales.
Swedish telecom operator Telia fell 8% after cutting its outlook for the fiscal year.
Reporting by Frank Prenesti for Sharecast.com