A combination of profit warnings from Rentokil Initial and Rexam, dire UK housing market figures and fear over more investment bank write-offs drove the FTSE 100 down nearly 200 points yesterday.

The pan-European sell-off began in early trade after falls in Asian markets and accelerated in the afternoon when Wall Street opened in negative territory. The markets, excited earlier by the coordinated move by central banks to inject cash into the loan market, decided that the move would simply tide lenders through the year-end.

Mark Thomas, of Keefe Bruyette & Woods, said: “Coordinated action by the central banks appear to us more a statement of intent over the year-end rather than a market-changing event.” Instead, a £520 million write-off of loans unrelated to sub-prime mortgages by HBOS, down 68½p to 764½p, was taken as a warning that the credit crunch was spilling out into ordinary bank loans. Royal Bank of Scotland lost 28½p to 433½p, and Barclays fell 33p to 523p. Cazenove gave warning that RBS might have to raise £5.8 billion in a rights issue. Northern Rock, down 13.2p at 86p, added to the gloom with its rumoured trading statement appearing and revealing a £281 million write-off.

The FTSE 100 ended down 195.6 points at 6,364.2, with only five stocks in the black. BG Group was one, up 8p at £10.91 on growing hopes of a gas discovery off Brazil, where it owns stakes in a block near the massive Tupi field. There is still persistent talk of Chinese stake building.

Tullow Oil was also up, 4½p at 675½p, buoyed by an upgrade of oil stocks from Merrill Lynch. It said that Tullow should soon raise its estimate of the size of its reserves. But Cairn Energy was down 20p at £25.60, even though Merrill said that it was poised to benefit from takeover approaches.

GlaxoSmithKlineadded 3p to £13.17 as it talked up its pipeline of neuro-science drugs, but Deutsche Bank cut its target price to £13.40, saying that competitive threats to Advair were growing.

Rentokil Initial tumbled 22 per cent, or 32.4p, to 114.3p after it told of a slump in demand for parcel deliveries from businesses and consumers.

Rexam, the drinks can maker, fell 78½p to 409p after saying that rising fuel costs and the weakening dollar would hit profits.

Taylor Wimpey fell 21.3p to 207.7p and its fellow housebuilder Barratt Developmentslost 30½p to 478p after a survey by the Royal Institution of Chartered Surveyors showed house prices falling last month at their fastest since May 2005.

Home Retail Group, the owner of Homebase and Argos, lost 27¾p to 330¾p, hit by Goldman Sachs cutting its price target on Wednesday to 283p. Pearson, the publisher of US textbooks, fell 41½p to 704p after Credit Suisse cut its target to 680p and gave warning that the US education market was facing its greatest cyclical pressure for seven years.

New York: Shares on Wall Street finished mixed after a spike in wholesale prices touched off inflation concerns and partially overshadowed a strong increase in retail sales last month. A solid forecast by Honeywell International propped up the Dow Jones industrial average, which closed at 13,518.00 points, up 44.10.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lenders face huge hit on mortgage fraud
• Mortgage rescue fund at the ready
• Zoom airline collapses and halts all flights