Aviva suffers torrid FTSE session

Aviva suffered another torrid session on the London market today as fears over the insurance sector failed to subside.

The stock plunged a further 14% into the red following yesterday’s dramatic 33% decline, with the wider FTSE 100 Index also struggling after poor economic news in the US.

Worse-than-expected US Labor Department figures showed the unemployment rate jumped to 8.1% last month, sending America’s Dow Jones Industrial Average lower after initial gains and putting pressure on London’s Footsie – closing just 0.9 points up at 3530.7.

The top flight index had gained as much as 60 points at one stage in a fight back after the previous session’s 3% slump.

But sentiment remained downbeat, with insurers again littering the fallers board.

Aviva dropped 26.6p to 163.3p as concerns mounted surrounding its solvency after yesterday’s decision to maintain its dividend.

Legal & General followed with a decline of 1.8p to 24.8p after opening in positive territory, while Prudential slipped 11.75p to 209.25p.

Friends Provident also sunk into the red, down 3p at 57.7p. There was no immediate evidence that short-sellers were to blame for the sharp sector-wide sell-off.

On a quieter day for corporate news, building and plumbing firm Wolseley was the leading faller after confirming plans for a £1bn €1.11bn) fundraising.

The stock fell 15% or 25p to 140.4p as underlying profits also tumbled by almost two-thirds.

BT fell 11% after broker Morgan Stanley downgraded the stock and said it feared the telecoms group may cut its final dividend in order to fund pension top-ups. Shares were off 9.3p at 74.1p.

Banks HSBC and Royal Bank of Scotland were likewise suffering losses, down 16.75p at 360.75p and 1p at 19.8p respectively. Barclays also fell, dropping 1% or 0.7p to 64.8p.

However, Lloyds Banking Group added 1.7p to 42p as reports suggested the firm was close to sealing a deal to insure toxic assets.

Advertising giant WPP was another big riser after annual results beat expectations, although the firm also warned underlying revenues would fall 2% this year. Shares added 15.75p to 390p, or 4%, as WPP said it was hopeful of a trading revival in 2010.

And energy stocks lent support to the market after oil prices climbed above 44 US dollars a barrel.

Royal Dutch Shell rose 54p to 1440p, while BP cheered 1p to 414p. Elsewhere in the commodity sector, Rio Tinto added 92p to 1825p and BHP Billiton improved 49p to 1156p.

Outside the top flight, paving stone maker Marshalls rose 3p to 75p as investors backed its cost-cutting strategy, even though it slashed dividend payments to conserve cash.

The biggest Footsie risers were Eurasian Natural Resources up 24.25p at 376.25p, Rio Tinto ahead 92p at 1825p, Randgold Resources up 170p at 3431p and Standard Chartered up 36.5p at 752.5p.

The biggest Footsie fallers were Wolseley down 25p at 140.4p, Aviva off 26.6p at 163.3p, BT Group down 9.3p at 74.1p and FirstGroup down 21p at 210.5p.