Fears over whether insurers have enough capital continued to weigh on the sector with Standard Life, RSA Insurance and Friends Provident leading the FTSE fallers' board. However, Prudential, which has lost more than 30 per cent in the past week, was the top gainer, up 12 per cent to 303p. This was on weekend reports that it was considering buying AIG's assets in Asia and was seeking Far Eastern investors to take a 20 per cent stake.

Cazenove's James Pearce warned that this would still leave the insurer, which announces results tomorrow, short of funding.

"The fact that the group is seemingly looking at a massive acquisition at a time when the market increasingly believes its own balance sheet appears to be under significant duress suggests that management are out of step with investor concerns.

"Unfortunately for shareholders, even if sound solvency information emerges tomorrow, the stock will now probably be dogged by fears of funding risk."

There are also fears that the Financial Services Authority may insist the insurers find more capital. Aviva, which was also heavily sold on Friday, lost another 2.6 per cent to 300.25p. The insurers were also sliding after China's Ping An took a big writedown on its investment in Fortis, signalling that a bid for or stakebuilding in any of the other western insurers looks increasingly unlikely.

The FTSE 100 was up 85 at 4148 by 10.44am, as mining stocks and oils rebounded a little from heavy falls last week on hopes that China could bolster its weakening economy

Ashmore lost 12 per cent to 144.75p after Goldman Sachs reiterated its neutral advice, and cut its earnings forecast saying that investors were choosing to delay committing funds while clients were increasingly seeking to repatriate non-US assets because of the turmoil.

It cut its 12-month price target to 135p from 280p.

Merrill Lynch cut its rating on Standard Chartered, up 2 per cent at £11, from "buy" to "neutral",saying that there was a growing risk it would have to issue shares to raise capital. It also said slowing economies in South Korea, Taiwan and India and Singapore would drag down earnings.

In the FTSE 250 housebuilders were on the slide after the Council of Mortgage Lenders revealed that home-loan lending had plunged 10 per cent in September to its lowest level since January 2005. Persimmon fell 17 per cent and Taylor Wimpey lost 12.5 per cent. Collins Stewart slapped a "sell" note on Persimmon, Redrow, Taylor Wimpey and Barratt Developments. It gave warning that Persimmon had high borrowings and may have to refinance its debt while possible goodwill writedowns would hurt the value of its assets.

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