The FTSE 100 Index closed at its lowest level for more than three years today after another traumatic session for UK blue chips.
The fall-out from Lehman Brothers’ bankruptcy saw the Footsie plunge 178.6 points to 5025.6 – a fall of 3.4% and its lowest close since June 2005.
The blue-chip share index had plunged below 5,000 at one stage in a second day of heavy declines, having fallen by more than 200 points yesterday.
America’s Dow Jones Industrial Average also endured volatile trading, touching positive territory briefly on hopes of a government aid package for troubled insurance giant American International Group (AIG) and a possible rate cut from the US Federal Reserve later tonight.
In London, Halifax Bank of Scotland was suffering amid funding concerns, down 22% or 50.5p at 182p.
But the group’s efforts to reassure investors saw it pull back from an earlier decline of nearly 40%.
Royal Bank of Scotland was off 21.4p at 189.1p, while Barclays dipped 8p to 308p after announcing it was in talks to buy some of Lehman’s non-toxic assets.
Sentiment was also hit by Bank of England governor Mervyn King’s letter to British chancellor Alistair Darling, which was issued after inflation hit 4.7% in August.
Analysts said the tone of the letter suggested interest rates may not be coming down as soon as some had previously hoped.
Insurers also extended declines, with Legal & General down 3.6p at 88.5p and Norwich Union parent Aviva off 29.5p at 460p, in spite of assurances over its exposure to Lehman.
But Lloyds TSB was a rare stock in the financial sector to make it onto the risers board, up 2%, or 6p to 279.75p on vague market rumours of stake building by a Chinese bank.
There was also some buying interest elsewhere, with defensive stocks such as Centrica up 10p to 332p and National Grid ahead 4.5p at 722.5p.
Oil stocks were on the back foot, however, after the cost of crude fell below 91 US dollars a barrel at one point. BP shed 3%, or 15.5p to 476p, while Royal Dutch Shell lost 5%, off 84p at 1,564p.
In the second tier, recruitment firm Michael Page International shed 22% or 71.75p to 250p, after Adecco ended its recent takeover interest in the group.
But fellow second tier firm Alliance & Leicester saw its takeover by Spain’s Santander take a step closer after shareholders voted in support of the deal at today’s extraordinary general meeting.
A&L – ahead 1p to 277.75p – is now set to see the £1.3bn (€1.63bn) deal complete next month, when it will be merged with Santander’s existing business Abbey.
The biggest Footsie risers were the London Stock Exchange up 24p at 760p, Enterprise Inns ahead 6.5p at 215p, Centrica up 10p at 332p and Lloyds TSB up 6p at 279.75p.
The biggest Footsie fallers were Hammerson down 26.5p at 913.5p, HBOS down 50.5p at 182p, John Wood Group off 46.75p at 342.75p and RBS down 21.4p at 189.1p.