Investors were today hoping for a shares recovery after £40bn (€59bn) was wiped off the value of London’s FTSE 100 Index.
Yesterday’s spectacular session left the index of leading shares at its lowest point since June 1995.
The 5% fall mirrored heavy losses across Europe as investors steered clear of stocks while uncertainty continued to surround the crisis in Iraq.
In London, there were also reports that the Footsie’s decline below key milestones had been driven by one large investor needing to sell shares.
At the close, the Footsie had extended the losses seen in all but one of its last six sessions to reach 3287 – a decline of 165.7 points.
Meanwhile in the United States, Dow Jones share index stocks finished modestly higher yesterday, boosted by late-in-the-day bargain hunting.
The gains came despite market wariness about a UN deadlock over a war with Iraq.
The Dow fell as much as 107 points, led by a brokerage downgrade of oil stocks, before rebounding.
Describing the turmoil in London, Tom Hougaard of financial bookies City Index: “It’s been a really bad day and it could still get worse. We could go below 3,000 by the end of the week.”
Insurers and banks again bore the brunt of the nosedive, although falling oil prices also pushed heavyweight energy stocks lower.
Casualties in the insurance sector included Royal & Sun Alliance, which fell 9%, Legal & General down 8% and Friends Provident off 11%.
HBOS slipped 8% and Royal Bank of Scotland tumbled 9% while BP and Shell were both off 9%.
However, the Footsie’s biggest faller was property group Canary Wharf – down 22% – after warning of growing vacancy rates in its London office portfolio.
Only two blue-chip stocks – building materials group Hanson and supermarket firm Safeway – closed in positive territory.
The latest falls again raised concerns about insurers breaching solvency margins measuring the level of assets they have after meeting liabilities.
However, the Financial Services Authority gave insurers breathing space in January by announcing insurers could apply to have rules relating to the way the margin is calculated waived or modified.