FEARS of a new backlash against bankers led to the second straight session of heavy falls on the FTSE-100.
The index of Britain's leading listed company's dropped 85.7 points to 5335.1 yesterday, a fall which followed Wednesday's 93 point decline.
Signs that the US president, Barack Obama, hit by recent election losses, is moving to limit the risk-taking and size of banks overshadowed a better than expected 8.3 billion profit from Wall Street icon Goldman Sachs.
The markets were also hit by a larger than expected increase in US unemployment, with the Dow Jones Industrial Average down by more than 2 per cent in early trading.
Among banking shares, Barclays fell 17.85p to 283p, as its chairman warned of a "tsunami" of regulatory pressure on the sector. Brokers at Credit Suisse also cut their target price on the company on Wednesday.
Part-nationalised Royal Bank of Scotland was the Footsie's leading faller, off 7 per cent, or 2.68p, at 35.32p, while Lloyds Banking Group fell 3.2p to 53.3p.
Investors turned to defensive companies such as utilities for shelter.
United Utilities was one of the best performers in the FTSE-100 despite announcing a cut in its dividend.
The company cut its payout because of a tough regulatory settlement with Ofwat.
A cut of 10 per cent was less than some in the market had expected, with some analysts fearing the company may have to sell off assets, which United rejected yesterday. Shares rose 16.5p to 525p.
Severn Trent was also on the front foot, climbing 20p to 1147p, while International Power was 7.7p dearer at 319.7p despite dispelling takeover talk earlier in the week.
Scottish & Southern Energy, meanwhile, fell 13p to 1,185p as HSBC cuts its rating on the shares to "neutral" from "overweight".
British Airways was the leading Footsie riser after low-cost rival EasyJet said key performance measures were either better than last year or ahead of expectations. BA shares rose 7.3p to 209.5p, while in the FTSE 250 EasyJet jumped 18.8p to 383.8p.
Supermarket chain Morrisons fell 3.5p to 295.3p after sales growth over Christmas surpassed rivals but underwhelmed investors.
Rival Tesco fell 4.75p to 420.95p, while Sainsbury's was 1.8p lower at 330p.
Mining companies were hit, somewhat ironically, by the strong rate of economic growth in China.
There is increasing talk that Chinese authorities may move to rein in the economy. Official figures showing growth of 8.7 per cent in 2009 only added to the fears. Any such moves would hit demand for metals, weighing on mining groups.
Fresnillo was the hardest hit in the sector, dropping 48p to 728p, while Anglo American closed off 163p at 2,488p and Kazakhmys fell 82p at 1,280p.
The midcap FTSE-250 index was dominated by pub firms after Enterprise Inns issued a trading update suggesting some encouraging trends for the industry. Enterprise shares jumped almost 20 per cent, or 18.6p, to 113.5p and rival Punch Taverns rose 6.6p to 81.05p, a gain of nearly 9 per cent.
Nichols, the drinks company that owns the Vimto brand, rose strongly after announcing the acquisition of draught soft drinks company Ben Shaws, along with a trading statement promising profits "significantly ahead of market expectations".
The Newton-le-willows headquartered company, once linked to rumours of a takeover by AG Barr, jumped 6.6 per cent to 322.75p.