Market reports: Footsie slumps to three-month low

SHARES in pensions and insurance group Standard Life fell 5.3 per cent yesterday, while banking giant HSBC dropped 3.6 per cent as both stocks went ex-dividend, meaning only current shareholders will receive the latest payout.

Edinburgh-based Standard Life closed down 11.2p at 199.5p, with HSBC slipping 23.5p to close at 622.5p.

The FTSE 100 index shed a further 1.7 per cent, closing down 97.05 points at 5,598.23, its lowest level for more than three months following ongoing fears over Japan's nuclear crisis.

David Morrison, market strategist at GFT Global, warned: "We are now getting in to the realms of selling the rally rather than buying the dips." Jittery investors headed for the exit as they were swamped by grim news, with reports of unrest in Bahrain and disappointing US economic news adding to the Japanese worries.

Traders reacted to reports of comments by European Union energy minister Gunther Oettinger that Japan's damaged nuclear plant was "out of control", before it transpired the comments were made on Tuesday and were not based on new information.

US figures revealing new home construction fell to the second lowest level on record last month compounded the late-session sell-off.

The Footsie is now trading at its lowest level since the end of November, with more debt worries for Portugal and higher unemployment rates in the UK also weighing on sentiment.

Blue-chips had shown signs of steadying after a 6 per cent rebound for Japan's Nikkei 225, but any progress was short-lived.

The Nikkei rallied after panic selling in the wake of the country's earthquake, with Japanese car makers and financial companies the main beneficiaries of the rebound. This restored confidence in early London trading, however news that Moody's cut Portugal's debt rating caused heavyweight UK banks to slump and a poor opening on Wall Street put paid to any rebound. Barclays, which has a high level of exposure to the Iberian peninsula, was down 10p to 282p.

While civil unrest in Libya rumbles on, there were fears that the crisis could spread to Bahrain after the Gulf state declared a state of emergency and Britons were urged to leave.

Brent crude oil prices, which have eased in recent days, rose 2 per cent to $111 on fears that production could be disrupted.

In the UK, news that the unemployment rate has increased to more than 2.5 million - its highest level for 18 years - added to the malaise.This put the pound under pressure, easing back to $1.60, although it held firm against the euro following Portugal's downgrade.

Attention was also focused on the retail sector after results from French Connection and Greggs and a broker upgrade for Primark owner Associated British Foods boosted shares.

AB Foods rose 9.5p to 949.5p after Credit Suisse changed it rating to outperform and said rising prices were set to benefit the company's sugar operations.

French Connection, which made profits of 8.9 million in the year to 31 January, rose 4.3p to 124p, while bakery chain Greggs lifted 0.4p to 466.3p after reporting strong profits and a positive start to the year.