London shares sharply lower

Leading shares in London remained low following Wall Street's dive on Friday, triggered by profits warnings, and as the insurers succumbed to a welter of worrying news, upsetting sentiment in the wider financial sector.

Earlier today the FTSE 100 index was 104.7 points lower at 3802.5, having been down to 3782.0 this morning.

On Friday, the Dow Jones lost 295.67 points after profit warnings from Philip Morris, SBC Communications and Delta Airlines.

On the economic front, UK net new consumer credit continued to look robust in August, reaching its highest level since December 2001 while credit card spending raced to its fastest since May 2000, according to data released by the Bank of England.

Still at the forefront of a 100-point sell-off, the insurance sector was sharply weaker across the board, as a welter of weekend press reports provoked renewed fears over the solvency of the sector.

The latest in the batch of news comes from Prudential, which said it will cut 850 staff over the next two years at its call centre in Reading as it transfers operations to Mumbai.

It expects to post a restructuring charge of about £20 million sterling by the end of 2004 to be offset by annual cost savings of £16 million from 2006, in addition to the annual cost savings target of 200 million by 2004 already announced.

Equitable Life has reportedly sold over 2 billion sterling of shares over the past months to meet solvency requirements, a move that has left it with a "negligible" holding in equities.

Royal & Sun Alliance, the greatest casualty in the sector, shed 7.5p to 98, Old Mutual dropped 3.5p to 70.5 and Prudential lost 15.5p to 346.5,

The weakness spread to other financials, with fund manager AMVESCAP down 24p to 316, and Barclays down 17.5p at 378.

The telecoms sector also remained weak, after a report quoted French industry minister Nicole Fontaine as saying debt-laden France Telecom will need more than a state-backed loan to guarantee its long-term future.

Vodafone lost 3.75p to 84.5, mmO2 shed 1.75p to 41 and BT Group dropped 7.5p to 167.5.