FTSE 100 falls 1.1%

The FTSE 100 dropped 1.10 per cent in the first hours of trading to 5.390.00 down 60.40 points.

Miner Xstrata rose 2.09 per cent, while medical equipment manufacturer Smith & Nephew was up 1.54 per cent.

Scottish & Southern Energy gained 1.46 per cent and BG Group was up 1.09 per cent – despite the board of Origin Energy dismissing its bid. Miner Rio Tinto rose one per cent.

Property firm Hammerson dropped 4.88 per cent, while HBOS fell 4.76 per cent 4.76 per cent as concerns grew about further losses in the US mortgage market.

Marks & Spencer was down 4.5 per cent after reports it could be introducing management job losses, while Legal & General and Prudential fell 4.07 per cent and 4.00 per cent respectively as traders got cold feet over insurance.

Rumours also spread among traders that the apocalypse will soon be upon us and the four horsemen were already cantering over the Russia steppes - causing a 6.66 per cent share price fall for Punch Taverns.

Sterling was down 0.12 per cent against the euro and 0.25 per cent against the dollar, making £1 worth €1.26705 and $1.85700. €1 buys £0.78919.