More gloom for FTSE shares

Investors suffered another session of woe today as the London market slid further below the 4,000 mark to hit fresh lows.

By the close of trading the FTSE 100 Index was down 37.5 points at 3,858, the lowest since September 3, 1996.

Although the Footsie had a good start, rising 99 points in the first hour of trading, the gains petered out during morning dealing and by mid-afternoon the market plunged 101 points before pulling back at the close.

The slide added to Monday’s 202-point drop, which brought it to its lowest level since September 6 1996.

It is the second consecutive day the market has closed below 4,000 and the third session in a row it has slid.

So far this week, £57bn (€90bn) has been wiped from shares, while £105bn (€166bn) has been lopped off in the last three sessions.

A mixed opening on Wall Street did little to help sentiment on this side of the Atlantic. By the time the London market closed, the Dow Jones was up but the broader S&P 500 and the tech-dominated Nasdaq both slid.

Analysts said the early rise came as investors hunted down bargains, but shares retreated partly on disappointment at the US trading.

Tom Hougaard, trader at City Index said: ‘‘The sell off today was because the prospect of a rally in the US diminished as the day progressed.’’

He added: ‘‘I do not believe this is the end to the falls.’’

Henk Potts, equity strategist at Barclays Private Clients, said: ‘‘Confidence is still being knocked all over the place.’’

He said the markets were seeing hugely volatile sessions, partly due to hedge funds driving shares down and also ‘‘people simply throwing in the towel’’.

‘‘Until we get something really concrete and big institutional players come into the market it is going to be very difficult. There’s the odd bargain hunter but it’s not in large enough quantities to balance it out.’’

‘‘No one can really call the bottom of the market,’’ he added.

Alex Scott, equities analyst at Seven Investment Management, said: ‘‘There is no real news to drive it. If anything, when trading started investors were looking for a bounce in New York to drive a rally here. But I think nerves have probably failed a little.’’

Financial stocks pulled the London market lower today. Banks worldwide have been hit by worries about exposure to company debt and bankruptcies, while insurance shares have been hit because their businesses suffer when stock markets drop.

Among the insurers falling heavily were Aviva, Royal & Sun Alliance and Prudential - the latter two will announce figures this week.

The falls partly followed Monday’s profit warning from Dutch insurer Aegon and today’s alert from Belgium-Dutch financial services group Fortis, which weighed on the sector.

An announcement by Aviva that it would cut the bonuses on its long-term savings policies also hit sentiment.

Banks and telecoms stocks also weighed on the market, although oil firms, which bore the brunt of Monday’s sell off, managed to stay ahead.