Aviva plunge leads FTSE drop

Insurer Aviva lost more than £2bn of its value today as financial stocks took a hammering during another bleak session for the London market.

Insurer Aviva lost more than £2bn (€2.2bn) of its value today as financial stocks took a hammering during another bleak session for the London market.

Aviva posted decent full-year figures and maintained its dividend, but shares still crashed 33% as analysts questioned whether the company could afford the payout in light of industry worries about capital strength.

A broker downgrade on Barclays added to the financial sector's woes as the FTSE 100 Index closed down 3% or 116 points at 3529.7.

The market was little moved by the Bank of England's decision to cut interest rates by half a percentage point to 0.5% and start a £75bn (€84.3bn) asset purchase programme.

Excitement in the mining sector over a plan by Chinese authorities to stimulate growth in the world's third largest economy faded after strong gains on Wednesday.

Kazakhmys slid 8% or 23.25p to 258.5p after it said it would cancel its dividend, while Anglo American dropped 58.5p to 975.5p and Vedanta Resources fell 31p to 523p.

Insurers occupied three of the first four positions on the fallers board, with Aviva down 95.1p at 189.9p, Prudential off 55.25p at 221p and Legal & General 10.8p lower at 26.6p. Friends Provident was off 9.5p at 60.7p.

Banks were also under pressure after Panmure Gordon cut its share price target on Barclays and said the firm's write-offs on the toxic financial assets hit by the credit crunch could be £5bn (€5.6bn) more than management guidance this year.

Shares were down 24% or 20.8p to 65.5p, while Lloyds Banking Group was off 15% or 7.4p at 40.3p.

Shares in the debt-laden building supplies group Wolseley fell 9% or 15.7p to 165.4p after it confirmed it may join the flood of firms currently involved in tapping the City for additional cash.

British Airways shares fell 9.4p to 126p after it warned of a 5% fall in revenues and said it expected another operating loss in the 2009/10 financial year.

Outside the top flight, shares in Premier Foods jumped 23%, or 6.5p to 35p, after it unveiled a long-awaited plan to tackle its £1.8bn (€2bn) debt mountain.

The Hovis and Branston Pickle firm will sell a 10.3% stake in itself to private equity company Warburg Pincus under plans to raise £379m (€426.3m) from shareholders.

Temporary power provider Aggreko topped the FTSE 250 Index as it said the difficulty faced by firms in getting credit had boosted demand for its equipment. It posted a 52.6% rise in full-year profits and said 2009 revenues should beat forecasts following a very strong start to the year.

Aggreko shares jumped 35.25p to 412.5p, a gain of 9%.

The biggest Footsie risers were British Land up 15.75p at 346.25p, Hammerson ahead 10p at 235.25p, Scottish & Southern Energy up 35p at 1077p, Inmarsat ahead 9.5p at 429p.

The biggest fallers were Aviva down 95.1p at 189.9p, Legal & General off 10.8p at 26.6p, Barclays down 20.8p at 65.5p and Prudential off 55.25p at 221p.

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