Korea has investors running for cover

Military tensions in Korea and Ireland's economic woes rattled investors' confidence in London yesterday as the FTSE 100 sank to a six-week closing low.

The latest shock for markets came when it emerged that North Korea had fired dozens of artillery rounds into South Korea. The south later said it had returned fire.

The volatile climate sparked a move to safer investments such as the dollar - which rose against most major currencies and led to a drop in commodity prices, hurting Footsie mining stocks.

The pound was consequently down against the greenback at $1.58, but the political unrest in Ireland saw sterling up against the euro at €1.18.

Will Hedden, sales trader at IG Index, said: "In a woeful day for equities, markets on both sides of the Atlantic struggled to find cheer.

"There's a slew of economic news out of the US today - including durable goods and Michigan sentiment - so this may be able to provide some support."

Mining stocks featured heavily on the fallers board with Vedanta Resources down 101p to 2,120p, Kazakhmys 49p lower at 1,391p and Antofagasta off 58p at 1,317p.

Meanwhile, investors said the Irish bailout, which is expected to amount to about 90 billion, would do little to shield other heavily indebted countries from a potential collapse in investor confidence.

This kept banking stocks under pressure for much of the session, with Lloyds Banking Group 0.6p lower at 63.3p and Barclays down 5.8p to 264.2p, although Royal Bank of Scotland fought back to stand 0.2p higher at 40p.

On the results front, Severn Trent rose in the top flight after it announced plans for annual dividend growth equivalent to the retail prices index measure of inflation plus 3 per cent. The company is cutting the pay-out for this financial year due to the impact of Ofwat price controls, which contributed to a fall in half-year profits yesterday. Shares in Severn Trent, which have risen about 25 per cent this year, lifted 9p to 1,450p.

In the FTSE 250 Index, pubs group Mitchells & Butlers fell 3 per cent despite a 26 per cent rise in full-year profits and a surge in food sales at the start of its new financial year. Investors were disappointed by the company's failure to reinstate its dividend, leading to a fall in shares of 9.2p to 344.6p.

Bank note printer De La Rue was also lower, down 9 per cent or 65.5p to 557.5p, after reporting a sharp fall in underlying half-year profits due to irregularities in paper production at a factory this year.It said the financial impact of the problems remained unclear.

Housebuilders also occupied the second tier fallers board after the British Bankers' Association said mortgage approvals for house purchase slumped to a 19-month low during October as buyers continued to stay away from the market.

Shares in Taylor Wimpey fell 1p to 24.2p and Barratt Developments declined 3.8p to 70.9p, while Persimmon eased 12.6p to 338.4p, a drop of 3 per cent.

Among the Scottish stocks, Dunfermline-based eye scanner maker Optos - which sells most of its machines overseas - rose 4.6 per cent or 4.75p to 109p ahead of today's full-year results.