FTSE slumps by 2%

The FTSE 100 Index shed more than 2% today as cautious economic forecasts from the Bank of England dealt a blow to market sentiment.

The benchmark index lost 94.2 points to 4331.4 after the Bank said a slower than expected resumption of bank lending could hamper a UK recovery.

Shares also came under pressure late in the session as worse than expected retail sales figures in the US sent Wall Street's Dow Jones Industrial Average down by more than 2% in early trading.

The Bank's forecasts meanwhile hinted that further boosts to the money supply may be necessary to hit the inflation target. This put the pound on the back foot against the dollar and the euro.

Banking stocks also took heavy punishment, as the Bank's caution brought the recent rally in the sector firmly to a halt.

The decline was led by part-nationalised Royal Bank of Scotland, which slid almost 13%, or 5.5p to 38p.

Meanwhile Barclays lost nearly 10% or 25.75p to 242.75p, HSBC slid 29p to 530.5p, while Lloyds Banking Group - another firm part-owned by the taxpayer fell 4.5p to 84.6p.

The economic gloom overshadowed positive results from catering group Compass, which saw shares surge 6% or 20.25p ahead to 353p - on the back of a higher-than-expected 41% rise in profits.

Meanwhile supermarket giant Sainsbury's 11.3% increase in underlying full-year profits had little impact on the grocer's shares, which edged 5.25p lower to 335p.

Property firm Land Securities was the top flight's leading faller after the firm said in results that it expected conditions "to remain challenging" in a weak economic climate.

The company has written off £4.7 billion in falling property values, representing more than a third of its portfolio. Shares tumbled more than 13% or 71p to 468p.

LandSec also dragged down several peers in the sector, with Hammerson and British Land off 37.75p at 285.25p and 35.75p down at 386.25p respectively.

Outside of the top flight, some of the biggest falls came from pub groups after a group of MPs called for the pubco model to be investigated by the Competition Commission.

Fears over the uncertainty that might be caused by a long-running inquiry into the sector caused Enterprise Inns to slump 42.25p to 117.25p in the FTSE 250 - a fall of more than 26%.

Punch Taverns, another firm to use the model which obliges landlords to buy products from a single company, was down 13% or 18p to 120p.

Meanwhile, shares in newspaper group Johnston Press lost nearly a third of their value after it said it was in talks with lenders after abandoning plans to sell its Irish titles. Shares were off 11.75p or 38% at 19.25p.

The biggest Footsie risers were Compass up 20.25p at 353p, Shire up 23.5p to 878.5p, Unilever up 35p at 1506p and Royal Dutch Shell up 36p to 1637p.

The biggest Footsie fallers were Land Securities down 71p at 468p, Xstrata down 87p at 594.5p, RBS off 5.5p at 38p and Eurasian Natural Resources down 76.5p at 564p.