FTSE loses more than 3%

The FTSE 100 Index slid more than 3% today amid more woes in the banking sector and fears of bankruptcy among major US carmakers.

The recent modest rally for the blue-chip index was a distant memory in a difficult start to the week as the rescue of the Dunfermline Building Society by larger mutual Nationwide and a bank bail-out in Spain gave a fresh blow to confidence in financial stocks.

The FTSE eventually finished down 135.9 points at 3762.9 – or 3.5% – after a heavy sell-off sent Wall Street’s Dow Jones Industrial Average down almost 4% in early trading.

US markets were hit after the White House rejected rescue plans from General Motors and Chrysler, bringing the prospect of a devastating bankruptcy a step closer.

Markets across the globe were under pressure, with Hong Kong’s Hang Seng and Japan’s Nikkei 225 both registering falls of more than 4%. France’s CAC 40 and Germany’s Dax fell 3.8% and 5% respectively.

In London, Lloyds Banking Group was the biggest victim in the sector, tumbling 11.3p to 64.8p, or 15%. It was closely followed by Barclays, which fell 14% or 24.7p to 149.1p as its revival of recent sessions was also halted by a downgrade from Societe Generale.

Elsewhere in the sector Royal Bank of Scotland was off 3.3p at 23.3p, while HSBC fell 32p to 370.5p. Alongside Dunfermline’s woes, nationalised lender Bradford & Bingley added to the gloom over the sector after saying it was writing off more than £500m (€539.6m) in mortgage loans turned sour.

The leading FTSE faller however was Liberty International, off 67.5p at 365.5p after falling victim to a downgrade from Charles Stanley.

The brokers cut Liberty to reduce from hold, noting a strong recent run for the shares and uncertainty over a possible rights issue.

On a shortened risers board, telecoms firms enjoyed a better session. Cable & Wireless gained 1.6p to 136.6p despite JP Morgan cutting its price target on the firm.

Meanwhile mobile phone giant Vodafone edged 0.1p higher to 116.4p after an upgrade from brokers at Royal Bank of Scotland, although the stock gave up greater gains seen earlier in the session.