The prospect of multibillion-dollar orders for its in-flight refuelling equipment kept Cobham flying high above the clouds that were looming glumly over the markets yesterday. The FTSE 100 dropped 46.77 points to 4,140.23, its lowest level since April, but the Dorset-based manufacturer — formerly known as Flight Refuelling — rose 0.9p to end the day at 177.9p.

The company, which first produced air-to-air refuelling kits as far back as the 1930s, could earn as much as $5.7 billion (£3.6 billion) from supplying the new Joint Strike Fighter. According to Steve East, a Credit Suisse analyst, partner nations on the fighter project are looking to order a total of 3,100 aircraft. As each refuelling system is worth $950,000, that would translate to almost $3 billion for Cobham, even before maintenance and replacement orders are factored in. If the partner nations’ ambitions for 6,000 were achieved, that would bring the total to $5.7 billion, Mr East said.

The FTSE was dragged down by life insurers and banks, as the Government’s White Paper on financial regulation raised fears that they would need to raise fresh capital. There was also a rumour that one of the big life insurers was being closely scrutinised by the Financial Services Authority because over-investment in guaranteed annuities had left it short of cash. Analysts said that this was unlikely, given that they had all recently published their solvency levels.

Legal & General, the biggest provider of annuity products, was the worst performer, closing down 4.72p at 49.78p, while Aviva slid 28p to 303p and Prudential fell 25p to 370p. Royal Bank of Scotland lost 1.66p to close at 36.65p, Lloyds fell 2.29p to 65.65p and Barclays slipped 9p to 287p.

British Land fell 22½p to 355½p after an Israeli property consortium withdrew from talks to buy a £100 million stake in its Broadgate office complex. Land Securities fell 22p to 416¾p in sympathy.

InterContinental Hotels fell 14p to 592p as Nigel Parson, of Evolution, set a 475p target and said that hopes of a recovery in hotel demand in the United States in the autumn were premature. Smiths Travel Research, an industry analyst, now expects revenue per room this year to fall by 17 per cent, far worse than its earlier forecast for a 9.8 per cent drop. Mr Parson said that “the traditionally lucrative autumn conferences and meetings season is likely to be a wash-out” and hoteliers were scrambling to cut room rates to bring in custom.

BHP Billiton rose 8p to £13.08 amid talk that the Chinese had caved in on iron ore price negotiations. Morgan Stanley raised its forecasts for BHP and Rio Tinto, saying that costs were falling faster than expected. Rio fell 24½p to £18.95, nevertheless, as the Chinese arrested one of its iron ore executives over alleged industrial espionage.

Xstrata fell 3¾p to 587.1p. There is talk that the partner owners of Glencore, its 35 per cent shareholder, are looking to sell a stake to outside investors in order to allow them to pay off retiring colleagues.

• New York: Investors shrugged off concerns about the strength of a recovery and an uncertain earnings season. After early falls, markets made up ground in afternoon trading. The Dow Jones industrial average closed up 14.81 points at 8,178.41.

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