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LONDON - Britain's FTSE 100 share index fell 2.6 per cent overnight (NZ time), its largest percentage drop in 10 months, as concerns over the US economy and problems with mortgage lending sparked a fresh round of global selling.
Fears of a wider impact from some US home owners falling behind with their mortgage payments in the subprime lending market clobbered financial shares, accounting for nearly 29 per cent of the FTSE 100's losses.
HBOS tumbled 5.75 per cent, Royal Bank of Scotland lost 4.5 per cent, HSBC sank 2.5 per cent and Barclays gave up 4.6 per cent.
Other financial stocks such as private equity group 3i , and Legal and General , also fell.
The FTSE 100 ended down 160.5 points at 6,000.7 points, the lowest close since October 2006. It has lost almost 4 per cent this week, snapping a brief recovery following the near 5-per cent plunge triggered by a sharp fall in Chinese stocks on Feb. 27.
Continental European shares were also battered, while US stocks were off in their late morning trading after the second-worst sell-off of the year on Tuesday.
"We are entering the phase of the market that is going to spell lower prices. I don't think this is going to go away," said Tom Hougaard, chief market strategist at City Index Markets.
"I'm of the opinion that we need to see a really healthy correction to get some of the weak hands out of the markets. Then we'll see if there is any life left at all in the market."
Hougaard said he expected the FTSE 100 to fall below the 6,000 mark and the Dow Jones industrial average to trade down to around 11,500.
- REUTERS