The media’s focus yesterday may have been on events in New York, but the tremors on Wall Street spread far and wide – not least to London, where worries over further broker and bank insolvencies and a global recession drove the FTSE 100 down 217.3 points to a 2½ year low of 5,414.4.

Banks - inevitably – led the way, with HBOS down 67½p to an eight-year low of 460½p and Barclays off 40½p at a five-year low of 392½p, but they were far from the only disappointments on a troubled day. Miners, struck by fears that a recession in the United States would spread to Asia and hit demand for metals, took almost as much off the London index. Kazakhmys, which had been buoyed by ENRC saying that it was considering a bid, fell 166p to £16.24. Vedanta Resources slumped 196p to £20.34. ENRC closed 15p down at 910p.

The US Federal Reserve’s firesale of Bear Stearns and other emergency measures were taken by the market as an indicator that it knew of other financial firms that were vulnerable. Traders were expecting a further sell-off this week and hoping that the Good Friday holiday would provide a breathing space.

Sandy Chen, of Panmure Gordon, said: “This is not a liquidity crisis, it’s an insolvency crisis.” He said that anything exposed to the wholesale funding market, such as HBOS, would be hit.

And the worst-hit of all in London? Icap, the interdealer broker, which ended the day down 91½p, or 15 per cent, at 506½p. Steve Clayton, of Mirabaud Securities, said two weeks ago (after the collapse of the Peloton hedge fund) that Icap, valued then at 18 times this year’s forecast earnings, was vulnerable to a dramatic fall in long-term trading volume as its clients, highly borrowed hedge funds and investment bank proprietary trading desks, were unwinding positions.

Icap recently reported a surge in volume, which could be its clients selling down. Mr Clayton said that of 14 analysts that cover Icap not one had a “sell” recommendation.

Similar worries about a dearth of commissions as trading volume dries up also hit the London Stock Exchange, which fell 107p to £11.25. It was £19.50 at the start of the year. IG Group, the mid-cap spread-better, down 41½p at 317¼p, and Tullet Prebon, the interdealer broker, which fell 34½p to 430p, were both hit by similar fears.

Yell fell another 20.3p to a new low of 147p ahead of ejection from the blue chips next week as fears over it breaching covenants continued.

Of the handful of risers, Compass was buoyed 2¼p to 308¾p by director buying, Shire rose 8p to 998p amid continuing talk of bid interest from Pfizer and British Energy added 64p to close at 635½p after it said that it was in talks with a number of parties about a takeover.

In the FTSE 250 Mitchells & Butlers lost 41¼p to 335¾p amid fading hopes of a bid from Punch. M&B management has been talking up its prospects as an independent company, leaving little room for a takeover. Panmure Gordon cut to “sell”.

New York: Wall Street fluctuated in temperamental trading as investors grappled with news of JPMorgan Chase buying Bear Stearns in a deal backed by Washington. At the close the Dow Jones industrial average was up 21.20 points at 11,972.30.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Food prices rise 8.3% on soaring fish and meat
• Car sales crash as economy hits skids
• House prices fall but Bank leaves rates on hold