The FTSE 100 Index was in retreat today as uncertainty over the fate of the US banking bail-out unsettled investors.
The London market posted its first winning session of the week on Thursday as hopes of a deal mounted, but shares across Europe fell back into the red after talks in Washington ended last night without agreement.
The Footsie was 1.5%, or 78.6 points, lower at 5118.5 by mid-morning, with France’s CAC 40 and the German Dax also losing nearly 2%.
Banking and insurance shares were unsurprisingly the biggest fallers on the London market as traders looked for a lead from the US Government. Bank of England moves alongside other central banks to inject liquidity did little to lift the gloom.
The leading faller was insurer Old Mutual, off 7% or 7p to 80.8p as the firm was also marked down by analysts at Merrill Lynch.
Merging banks Halifax Bank of Scotland and Lloyds TSB fell 15.25p to 258p and 6.5p to 177.5p respectively as Credit Suisse suggested the combined banks may need to raise more cash.
Royal Bank of Scotland dipped 5.25p to 215.25p. Bradford & Bingley fell another 13% in the FTSE 250 Index, off 2p to 19.25p.
Retailers were also under pressure after John Lewis reported a sharp fall in department store sales for last week and posted flat sales for Waitrose.
Marks & Spencer, which is due to release a trading update next week, was down 2.5p at 225.5p, while Next shed 35p to 1087p, or 3%.
Elsewhere in the sector, JJB Sports lost more than half its value after it scrapped its half-year dividend because of the uncertain trading conditions.
The sports retailer announced half-year losses of £9.7 million and saw its shares fall by 62.25p to 41p.