Dismal morning for FTSE

Investors were reeling today after European markets dived 6% in the aftermath of another weekend of financial turmoil.

Banks and mining stocks took the biggest hit in the FTSE 100 Index, which reached mid-morning 306.1 points lower at 4674.2. Germany’s Dax was off 5.8% after the country’s government was forced to provide state aid to leading institution Hypo Real Estate.

The worries about rapidly-spreading contagion meant investors were quick to overlook Friday’s Congress approval for the US financial sector bail-out.

There were no risers in the FTSE 100 Index and just two stocks found positive territory in the FTSE 250 Index.

The biggest decline among financials came from Halifax Bank of Scotland, which lost gains seen at the end of last week due to the uncertainty. Shares were down 30.8p to 169.7p, while Royal Bank of Scotland was off 24.7p at 161.5p and HBOS’s merger partner Lloyds TSB slid 27p to 263.25p, a fall of 9%.

Insurers were also under pressure amid concerns about the impact of a falling stock market on the capital surpluses held by firms in the sector. Aviva fell 43.75p to 434.25p, while Prudential was off 53.75p to 444.25p.

Miners added to the pain after investment bank UBS warned earnings in the mining sector could fall by a further 46% in 2008. It also said that commodity prices could drop another 25%.

The whole sector tumbled, with Kazakhmys off 19% or 109.5p to 459.5p and Antofagasta down 46.75p at 333.5p.

British Airways declined for a second successive session after chief executive Willie Walsh reportedly said current conditions meant the airline’s tie-up with Iberia could take longer than expected to conclude. Shares fell 7% after weaker passenger numbers on Friday and were off another 9% or 15.8p to 149.6p today.

Debt-laden firms were shaken by the day’s events, with housebuilder Taylor Wimpey down 4.5p at 30.25p and Mitchells & Butlers off 20p at 190.25p.