FTSE down at market close

More than £50 billion was wiped off the value of blue chip stocks today as news of Lehman Brothers’ dramatic demise spread havoc throughout world stock markets.

The Footsie nose-dived by 212.5 points to close at 5204.2. But it managed to pull back from an earlier drop of more than 5% – taking it near to levels not seen since 2005 – following a marginally lower-than-expected fall in early trading on Wall Street.

America’s Dow Jones Industrial Average was 2.6% down, but there had been fears of a 3% fall on opening.

Only a dozen stocks ended the session in positive territory in the wake of the bankruptcy of the US investment bank.

The Bank of England pumped in £5 billion of extra cash to ease the pressure on money markets, while the European Central Bank also injected funds.

In Europe, France’s CAC 40 dropped 3.8% and the Dax in Germany slid almost 3%.

In London, confidence in the financial sector was shattered by news that Lehman Brothers filed for Chapter 11 bankruptcy protection and Merrill Lynch had been bought in a 50 billion US dollar (£28bn) deal.

Halifax Bank of Scotland was one of the leading fallers, down nearly 18% as investors digested the seismic announcements and bolted for the exit.

HBOS shed 49.5p to 232.5p, while Royal Bank of Scotland slid 29.25p to 210.5p.

Barclays – which had been one of the front-runners to stage a rescue deal for Lehman before it walked away – also lost 34.5p to 316p. In the FTSE 250 Index, Bradford & Bingley tumbled 15%, or 5.75p to 31.5p, and Alliance & Leicester shed 19.75p to 276.75p on the eve of its shareholder meeting to vote on the bank’s takeover by Abbey owner Santander.

Other financials were on the back foot amid funding problems also announced over the weekend at US insurance giant AIG.

Life and pensions giant Friends Provident headed the fallers board, down 17.6p at 81p, insurer Prudential lost 51p to 500p and Norwich Union owner Aviva dropped by 44p to 489.5p.

Meanwhile, New York crude oil prices fell back below 100 US dollars for the first time since April, sending oil majors BP and Royal Dutch Shell down 4% – a drop of 18.5p to 491.5p and 70p to 1648p respectively.

But lower crude costs provided some much-needed support to travel and fuel dependent blue chips, with tour operator Thomas Cook up 4.75p at 255.5p.

And the sell-off saw housebuilders hit hard in the FTSE 250, with Taylor Wimpey off 15%, or 8.25p to 45.75p.

The gloom also spread to the Footsie’s pubs group’s amid the prospect of prolonged economic difficulties as banking turmoil lingers. Enterprise Inns was 8% lower, down 18p at 208.5p.

The biggest Footsie risers were Capita Group up 17p at 719.5p, Thomas Cook Group ahead 4.75p at 255.5p, Carnival up 34p at 2108p and British Airways up 3.75p at 261.25p.

The biggest Footsie fallers were Friends Provident down 17.6p at 81p, HBOS off 49.5p at 232.5p, Kazakhmys down 121.5p at 780p and RBS down 29.25p at 210.5p.