* Powerful Pakistani politician arrested in London
* Arrest sparks fears of violence in city of Karachi
* Altaf Hussain's party MQM calls for calm from supporters (Adds details from statement from MQM, bullets)
By Belinda Goldsmith and Maria Golovnina
LONDON/ISLAMABAD, June 3 (Reuters) - One of the most divisive and feared figures in Pakistan was arrested in London on Tuesday, sparking fears of a violent backlash in Pakistan and sending the country's biggest city of Karachi into lockdown.
Altaf Hussain, leader of the powerful Muttahida Qaumi Movement (MQM) and wanted in Pakistan in relation to a murder case, was arrested in northwest London where he has lived in self-imposed exile since the early 1990s.
Police said a 60-year-old man was arrested on suspicion of money-laundering during a morning raid but declined to confirm his identity. A spokesman said the man was escorted to a pre-arranged hospital appointment during the day and remained in custody late on Tuesday.
A spokesman for the MQM headquarters in London confirmed that Hussain was arrested at his home in the morning as part of an ongoing investigation and said he was happy to help police with their inquiries.
"While these inquiries are taking place, the party leadership calls for calm from our millions of party members and supporters in Pakistan and across the world," spokesman Nadeem Nusrat said in a statement.
"The party is prepared to assist the British police with all of their enquiries as neither Mr Altaf Hussain nor the party have anything to hide."
Hussain is known for his fiery addresses to his supporters in Karachi though a loudspeaker connected to a telephone. He effectively controls the sometimes violent port city of Karachi from his headquarters in a north London suburb.
The MQM party's support base is millions of Muslim Urdu-speaking people whose families migrated to Karachi and nearby areas at the time of the 1947 partition of India.
Hussain's hold on Karachi is so strong that he is capable of shutting down entire neighbourhoods of the city of 18 million.
Within minutes of his arrest, panicked shop-keepers and market stall owners rushed to close their businesses for fear of violence, residents said.
"We deployed extra security at the British High Commission in the southern part of Karachi as soon we learnt about Altaf Hussain's arrest in London through media," Deputy Inspector General Abdul Khalique Shaikh told Reuters.
"We have increased police patrolling and we are making further deployments at sensitive spots in the city."
Tension was high and residents said the city came to a standstill due to massive traffic jams as people rushed home for fear of violence.
Pakistani television showed images of a car set on fire and sporadic gunfire could be heard in the city but no major acts of violence were immediately reported.
"All shops and markets are shut. Even small cigarette shops are closed," Mohammad Moosa, a resident of Karachi, told Reuters. "Petrol station operators have also closed down, fearing violence." (Additional reporting by Syed Raza Hassan; Editing by Nick Macfie/Jeremy Gaunt)