Market Report - London

Dark clouds continued to blanket London's stock market yesterday, with all the main indices sustaining further severe losses as the near-collapse of Long-Term Capital Management, the US-based hedge fund, continued to gnaw away at investors' fast-fading confidence.

Although finishing well above the day's lowest levels, the FTSE 100 index nevertheless sustained its second successive three-figure fall and its third consecutive decline, in the wake of more damaging news regarding LTCM. That came as the head of UBS, the Swiss bank, resigned and it emerged that the Italian central bank has used its foreign exchange reserves to invest in LTCM. More worrying was the emergence of another profits warning in the global banking sector. Hard on the heels of the Dresdner Bank and ING warnings was a similar story from ABN Amro, the Dutch bank.

Gilts surged again, mostly at the expense of equities, with dealers acknowledging another flurry of switching between the two markets.

At the end of a dismal day for investors, the FTSE 100 index was 157.8 or 3.2 per cent lower at 4,750.4, a two-day fall of 314.0 or 6.2 per cent. At its worst, when the damaging rumours were at their height, the index was down 184.0 at 4,724.2. The market's mid and smallcap stocks were also given another severe shaking, the FTSE 250 ending the day 98.5 down at 4,342.7, a fall of 186.2 or 4.1 per cent on the week. The FTSE SmallCap , which dropped below the 2,000 level for the first time since January 1996 in the middle of the week, settled 38.6 off at 1,914.2. Over the five-day period, the SmallCap has given up 97.3 or 4.8 per cent.

There was unmitigated gloom around the trading desks at the news of the heavy job losses at ING Barings.

Credit Lyonnais Securities Europe chopped its end-year forecast to 5,500, noting that equity markets "have turned from euphoria to blind panic", adding that the slide has "thrown up attractive buying opportunities".

The Dow moved erratically yesterday, kicking off in good heart, immediately following the September non-farm payroll report, before slipping away and posting an 80-point fall and rallying again as London closed. Turnover was 960 million shares.