FTSE rattled by Fed inaction

Investors on both sides of the Atlantic were rattled today after the US Federal Reserve failed to deliver a cut in interest rates.

The FTSE 100 Index shared Wall Street's disappointment to close more than 2% lower - down 100.6 points at 4171.1.

Shares in London were under pressure from the start of the session after the Dow Jones Industrial Average closed 2% lower last night.

Investors in the US were disappointed that the Federal Reserve kept rates on hold at 1.75%, while also giving downbeat remarks about the economy.

Wall Street's mood was a little more measured today but the Dow Jones continued to fall over persistent doubts over the economic recovery.

Today's deadline for corporate executives to vouch for the accuracy of their financial statements also added to nervousness in the US.

In London, the gloom encouraged investors to book profits given the healthier run enjoyed by the Footsie last week.

Nearly all sectors were hit by the sell-off, although banks and oil stocks took a particular battering.

Among the banks, HBOS fell 18p to 720p, HSBC slid 19½p to 732p, Royal Bank of Scotland fell 30p to £15.25, Abbey National fell 23½p to 721p and Barclays was down 8p at 440p. Lloyds TSB was off a hefty 6%, down 37½p at 542½p.

A number of banks - such as Lloyds, Barclays and RBS - were also lower as they went ex-dividend, meaning that investors buying the stock today will not be able to scoop recent dividend payouts.

The banking sector was also hurt by disappointing figures from European bank Credit Suisse.

Former building society Bradford & Bingley was caught up in the slide. The group today posted a jump in first-half profits but cautioned of a challenging second half. Shares fell 15½p to 324½p.

Insurers on the way down included Aviva, off 15p at 495p, although Prudential turned around its fortunes to rise 3p to 516p.

But Royal & Sun Alliance continued to come under pressure after last week's disappointing half-year results announcement. Shares, which had started the month at 172p, were down another 5¾p to 95p.

Oil firms also slid, with Shell down 17p at 425p and BP off 14½p at 501p. The oil groups' shares were lower because they also went ex-dividend.

Media stocks suffered after disappointing results from debt-laden French group Vivendi Universal as it announced the sale of many of its assets and unveiled six month losses of £7.8 billion.

Reuters fell 12¼p to 233p, Pearson eased 30½p to 529p and BSkyB slipped 25½p to 540p.

Among the smaller stocks, British Energy continued to fall, down 6% or 4p at 59p.

The drop comes on top of a 30% slide yesterday when the group said its Torness nuclear plant in Scotland had been shut down following technical problems at the station.

Telecoms group and former Scottish Power arm Thus also slid, off 12%, or 1.43p to 10.23p, after it lowered revenue targets for the full-year.

But engineering firm Balfour Beatty bucked the trend to surge 5% after beating expectations with a 17% rise in half-year profits. Shares were up 10p to 203p.

The biggest Footsie risers were Bunzl up 10½p at 459p, Hanson ahead 9p at 394p, Legal & General up 2¾p at 121¾p and Smith & Nephew ahead 7p at 380p.

The biggest fallers were Sage Group down 9½p at 114½p, International Power off 9¾p at 122¼p, Lloyds TSB down 37½p at 542½p and mmO2 off 2½p at 40½p.