Shares plummet to six-year low

London's leading shares plunged more than 4 per cent to hit fresh six-year lows today as a £12.5bn cash call from HSBC sparked a major banking sell-off.

The FTSE 100 Index plunged below the intra-day trading low of 3665 seen in October last year to hit levels not seen since April 2003.

The heavy falls put the top-flight index in sight of the 3287 nadir reached in March 2003 - the worst depths of the bear market following the dot.com crash at the turn of the decade.

David Jones, chief market strategist at IG Index, said: "After the strong recoveries seen at the end of last year, many were starting to hope that the worst of the slides for stock market were behind us.

"Today's move to beneath the previous low raises the real prospect of another significant tumble, with 2003 lows of around 3300 a popular target in the medium term."

The Footsie was driven lower by news of a record £12.5bn rights issue from Europe's biggest bank, HSBC.

The call for funds from one of the world's safest banks - as well as a 62 per cent slide in annual profits and billions more in writes on its crisis-hit US consumer lending business - triggered a sell-off across the sector as sentiment took another jolt.

HSBC fell 20 per cent - wiping around £12bn off the bank's value - and was followed by double-digit losses for Lloyds Banking Group, which slid 11 per cent. Barclays fell almost 7 per cent and Royal Bank of Scotland - nearly 70 per cent taxpayer-owned - was 4 per cent lower.

All of Asia's markets were lower overnight, with Japan's Nikkei and Hong Kong's Hang Seng finishing almost 4 per cent lower as fears over the worsening US economy also hit confidence.

Wall Street's Dow Jones Industrial Average was also expected to open lower this afternoon after stocks took a pummelling on Friday.

Figures showed the US economy contracted at its fastest pace for more than a quarter of a century - shrinking by a mammoth 6.2 per cent in the final three months of last year.

The update was followed by a warning from billionaire investor Warren Buffett - known as the Sage of Omaha - that the economy would remain a "shambles" this year and "probably well beyond".

Elsewhere in the US, faltering insurer American International Group got another $30bn bail-out - its fourth government rescue - and reported the biggest quarterly loss in history today.

This put several insurance companies in London under pressure, with Legal & General off nearly 9 per cent, Old Mutual down 7 per cent and Aviva off more than 6 per cent.