As the FTSE 100 index dived below 6,000 for the first time since August, it was fitting that the London Stock Exchange was the biggest blue chip casualty.

It fell 6.5 per cent to £15.96 after Sanford Bernstein initiated coverage with a £16 price target. It warned that the LSE was the most exposed to equities and to looming competition from nascent online exchanges such as Chi-X and Turquoise. It prefers Deutsch Bõrse. Last week most of the investment banks behind Project Turquoise bought a stake in Chi-X, the pan-European electronic exchange which is already up and running. Deutsche shares also fell, however, amid fears of a general slowdown in equity trading as stocks plunge lower.

Cable & Wireless was down 6 per cent to 160p after Morgan Stanley cut its price target to 185p, saying that its earnings would be hit if it sold off its pension fund since it contains a surplus. It pointed to its underperforming Jamaica business as an area of risk.

Bear Stearns took a knife to the insurance sector, cutting its targets across the board. Aviva fell 3.7 per cent to 602p and Prudential was off 3.8 per cent at 644½p. It cut Friends Provident, down 3.3p to 154½p, to underperform.

Banks continued to slide following yesterday's falls, triggered by Citigroup's massive write-offs and its attempts to raise new funds, as well as fears over Merrill Lynch's funding. Royal Bank of Scotland fell another 6p to 384p. Goldman Sachs cut target prices for all UK banks, with RBS cut by 26 per cent to 455p, and said it had moved its targets to a three-month horizon to reflect current uncertainty.

HBOS fell 3.4 per cent to 618½p, HSBC was down 3 per cent at 748p and Lloyds TSB lost 3.5 per cent to 390¾p.

The London index was even lacking the usual support from mining companies, since metal prices were on the slide. Vedanta Resources was down nearly 6 per cent at £18.75, Antofagasta, the copper miner, lost 4.4 per cent to 604½p and Lonmin was down 4.3 per cent at £33.91. The copper price is falling again on fears of a US recession that will cut demand.

As a result the FTSE 100 fell 67.7 to 5,957.9 by 11am.

Northern Rock was again one of the top FTSE 250 fallers, down 11 per cent to 61¾p amid growing hints from the Government that it would be nationalised.

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