FTSE falls 4% in morning trading

The FTSE 100 Index dived 4% to a six-year low today as investors ran for cover after another blow to confidence in the banking sector.

Market heavyweight HSBC tumbled 23% – or 112p to 379p – after it scrapped its final dividend, announced a 62% fall in profits and confirmed plans to raise £12.5 billion from shareholders.

With Friday’s US GDP figures heightening fears over the depth of the recession for the world’s biggest economy, the FTSE 100 Index slumped 167.4 points to 3662.7 by mid-morning.

London’s decline mirrored the performance in Asia after Japan’s Nikkei registered a drop of almost 4% overnight,

Among other banking stocks, Royal Bank of Scotland was down 1.4p at 21.8p while Standard Chartered, which shares HSBC’s focus on Asian markets, was down 12% or 81.5p at 582.5p.

Insurers also took a battering on the day that AIG is expected to receive a 30 billion dollars bail-out – its fourth government rescue – and report the biggest quarterly loss in history.

Prudential, which is interested in buying some of AIG’s Asian assets, was 19.5p lower at 261p, while Aviva fell 20p to 269p.

Elsewhere, Whitbread shares were under pressure – down 4% or 31p to 715.5p - after it said like-for-like sales had turned “predominately negative” in recent weeks. This reflected a slowdown at the Premier Inn budget hotel chain.

Property firms were struggling after Segro said it was in discussions about a possible equity capital raising. Shares fell 25p to 82.25p as the statement fuelled concerns that a cut-price rights issue was in the offing.

Top flight rival British Land fell 63.5p to 394.25p and Land Securities dropped 49.25p to 499.75p.

And a report suggesting that ITV will scrap its full-year dividend on Wednesday caused shares in the broadcaster to tumble by another 4% or 1p to 23.75p.