The FTSE 100 Index closed in the red for the fifth session in a row today as economic fears and banking losses weighed on the London market.
Blue chip banks fell by as much as 10% amid investor worries about prospects for further write-downs and another round of balance sheet restructurings.
Poor retail sales figures and a bleak assessment of the UK economy from the British Chambers of Commerce also hit stocks, with the FTSE closing down 27 points at 4399.2.
But a more stable opening for the Dow Jones Industrial Average on Wall Street following its sharp fall last night helped narrow losses on the FTSE 100, which was down as much as around 100 points earlier in the session.
In a reversal of recent gains, banks were back in negative territory, with Barclays diving 18.7p to 165.9p – 10% off.
Royal Bank of Scotland fell 3.9p to 51.1p, while merger partners HBOS and Lloyds TSB were off 3.1p at 81p and 7.7p at 133p.
The weakness was also felt among insurers as Aviva lost 35.5p to 400p, Friends Provident fell 7.5p to 77p and Prudential eased 21p to 371p.
Elsewhere, Tesco sales figures were met with relief in the City, despite the supermarket’s weakest Christmas performance since the early 1990s.
Analysts described the result as robust and said the 2.5% growth in like-for-like sales for the seven weeks to January 10 was in line with expectations.
Tesco shares rose 1.3p to 351.6p.
Among other companies issuing trading updates, FTSE 250 firm Northern Foods surged 10% or 5.5p to 61.25p after it reported a 3.5% rise in third quarter sales.
It was matched by Premier Foods, which offset ongoing worries about its debt mountain by revealing a 10% improvement in second half sales. The Hovis and Mr Kipling firm saw shares gain 1.5p to 37.5p, or 4%, even though the company did not provide any further details about plans for a capital restructuring.
Debt worries also depressed shares in insulation and roofing firm SIG, which was 36.75p lower at 182.25p after an in-line trading update from the firm.
Another faller in the FTSE 250 Index was Game Group despite forecasting full-year profits ahead of expectations. Shares fell 1.75p to 145.25p as cautious comments from the company’s management team fuelled investor worries about trading prospects for 2009.
Topps Tiles was 3.5p lower at 26p after it said like-for-like sales for the first quarter of its financial year were down by more than 18%.
The glum mood in the retail sector spread to Currys owner DSG International, which was down 0.75p at 20.75p ahead of a trading update later in the week.