FTSE 100 drops sharply

The FTSE 100 dropped one per cent, or 68.5 points, in lunchtime trading as disappointing results from US bank Wachovia and General Electric hit confidence.

The index opened at 5,895.50 this morning, before slipping to a low point of 5827.00 at 13:30 BST as results from Wall Street signalled more losses for US banks.

Several banks, including Citigroup, Merrill Lynch and JP Morgan Chase are set to release first quarter results this week and analysts are concerned there will be more write-downs related to the subprime crisis.

By 14:35 BST on the FTSE 100, insurer Friends Provident was the biggest loser, dropping 8.6 per cent as private equity firm JC Flowers threatened to walk away unless the board opens talks next week.

Banks also registered falls. Alliance & Leicester declined 3.1 per cent, while Royal Bank of Scotland dipped 2.1 per cent and Barclays fell 1.9 per cent.

Although Bradford and Bingley registered a 4.9 per cent share-price fall on opening due to reports it was considering raising capital through a rights issue, a vigorous denial from the UK's biggest buy-to-let lender helped shares to recover.

Finance ministers, meeting for G7 talks, warned at the weekend that the credit crunch was far from over and more financial turmoil could be ahead.