Declines in the retail and mining sectors added to fears over US investment banking giant Lehman Brothers today.
Heavy falls seen overnight on Wall Street left the FTSE 100 Index struggling in mid-morning trade, down 61.4 points at 5354.2.
The boost offered by Sunday’s bail-out of mortgage giants Fannie Mae and Freddie Mac faded as concerns grew that Lehman might be unable to raise capital to bolster its balance sheet.
In London, falls among retailers and heavily weighted miners added to bank declines. Barclays fell 9.75p to 356p and Halifax Bank of Scotland eased 8.25p to 300.25p.
FTSE 250 stock Kesa Electricals sparked a retail slide after reporting a sharp fall in white goods sales at its Comet chain.
Kesa fell 17.5p to 140.5p, while B&Q firm Kingfisher dipped 2.8p to 136.3p as worries mounted over the home improvement sector. Home Retail Group, which owns Argos and Homebase, fell 5.25p to 245.25p after of a trading update tomorrow.
Next was down despite beating forecasts for half-year profits. Investors were spooked by its warning of a difficult 2009/10, causing shares to fall 31p to 1112p, dragging Marks & Spencer down 13p to 245p.
Miners were also suffering, with sector falls led by a 6% decline for Kazakhmys, off 53p at 351.5p.
Fuel-dependent stocks were meanwhile hit by oil prices moving back up from five month lows after production cartel Opec cut excess production by more than 500,000 barrels a day. British Airways was the biggest loser, down 8.5p at 254.75p.
But energy companies benefited from the cost of crude rising, with Petrofac ahead 7.5p at 569.5p.
ITV maintained its position at the top of the risers board, up another 1.5p at 47.3p following gains yesterday on speculation of investment from Italy and news of a new finance director at the group.