A slide in UK financial shares dragged the FTSE 100 to a five-year closing low this evening as a fresh bout of jitters on accounting and corporate earnings sent investors rushing for the exit.
Banks wiped 51 points off the FTSE after new accounting scares from US firms Qwest and Bristol-Myers Squibb, while Royal & Sun led insurers down with an 8.6 per cent slide amid worry about exposure to weak equities.
The benchmark index FTSE ended down 190.1 points or 4.3 per cent at 4,230.0, knocking 45 billion pounds off the value of the index and bringing losses this week to more than eight per cent after a fourth consecutive losing session.
It was the lowest close since April 1997, leaving the FTSE around 39 per cent below its end-1999 record high. Some analysts saw this as possibly one of the last spasms of the sell-off.
"It's getting close to capitulation. It might be there at around 4,000 but the market can't keep on losing three per cent a day for the rest of the year." said Mr Andrew Hobson, a fund manager at Exeter Asset Management.
"The market's been driven by sheer lack of confidence rather than fundamentals and has been for a good few weeks now. It's beginning to reveal some very good buying opportunities."
Solid volume of 2.5 billion shares showed there was strong conviction behind the retreat.
Doubts about the reliability of corporate accounts revived bad debt worries which pushed banks lower. Barclays fell 5.4 per cent, Royal Bank of Scotland shed 6.5 per cent and Lloyds TSB was down 6.1 per cent.
Shares in Abbey National lost 6.8 per cent, reversing gains which it made in the previous session after revived talk that National Australia Bank would launch a bid.
A Wall Street fall added to negative sentiment, with the Dow Jones industrial average down 87 points and the Nasdaq Composite 11 points lower by London's close.
Investors continued to shun drug and oil shares, with each sector knocking around 30 points off the index. BP fell 4.5 per cent and GlaxoSmithKline dropped 6.3 per cent.