THE market's volatility of recent sessions was taken to further extremes yesterday as fund managers and traders wrestled with the implications of the first Labour budget for 18 years and another burst of strength on Wall Street.

The FT-SE 100 opened 58 points down and within a few minutes had fallen to the session low of 4,688.8, as a handful of institutional sellers appeared.itself, led by the utilities, banks, properties and housebuilders, which all moved up due to the budget proposals.

Dealers also pointed out that London's opening stance had tended to overlook Wall Street's performance on Wednesday, when the Dow climbed 73 points, to just below its all-time closing high, as the US Federal Reserve's Open Market Committee left US interest rates on hold.

Worries about the implications of the abolition of the 20 per cent tax credit on dividends, were said to have been ignored by the institutions, which had been expected to shift out of equities and into bonds to fill the income gap.

But worries about the budget tax changes triggered a raft of rumours suggesting that the big players in the derivatives market had been left with sizeable losses from their recent operations.

There were dark rumours that at least four of the biggest players had incurred big losses - Pounds 350 million sterling was one figure bandied about - because of the changes.

Turnover in equities expanded rapidly, reaching 1.31 billion shares at 6 p.m.