FTSE sheds 100 points at open

The FTSE 100 fell more than 100 points in the opening session of the week, pressured by a combination of renewed concern about the health of the US economy and fading bid talk in the mining sector.

The blue-chip fell to 2 per cent to 5,785.0, extending its run of consecutive negative sessions to five and intensifying its worst start to a year since its launch in 1983. The index has now lost nearly 10 per cent since the start of the year.

The losses in London follow heavy falls in Asia as investors gave President Bush's stimulus package an underwhelming response. In Japan, the benchmark Nikkei 225 slumped 3.4 per cent to a 27-month low of 13,395.28 by the end of morning trading. The index has lost a quarter of its value in the past six months.

Hong Kong's Hang Seng declined 2.4 per cent to 24,606.36, while Australian stocks extended their losing streak to 11straight sessions. South Korea's Kospi and the Singapore benchmark index were also lower.

Stock markets may struggle for direction later in the session because US markets are closed for a national holiday.

In London, every single stock on the senior index, bar two at the centre of confirmed bid activity, fell in morning trade.

Miners suffered the heaviest falls, as investors turned their backs on the bid rumour that helped the heavily-weighted sector provide some protection from the bearish conditions. As talk of an improved offer from BHP Billiton (NYSE:BHP) for Rio Tinto lost its lustre. Rio lost 6.2 per cent to £43.96 and BHP fell 6.7 per cent to £12.84.

There were also losses in the wider resources sector. Vedanta Resources lost 9 per cent to £15.75, Xstrata fell 5.5 per cent to £31.80 and Antofagasta was 4.7 per cent at 574½p.

Financial stocks were hit by worries that monoline insurers, which guarantee complex debt products from the risk of default could suffer as the wider repercussions of the credit crisis unwind.

London-listed insurers fell across the board. Old Mutual lost 5.1 per cent to 132.6p, Standard Life fell 4.5 per cent to 202p, Prudential lost 4.1 per cent to 573p and Aviva was 4 per cent weaker at 556p. But Friends Provident rose 1.8p or 1.2 per cent to 154.3p after reports that JC Flowers, the US hedge fund, was considering a bid for the struggling insurer.

Wolseley (NYSE:WOS) was the single biggest faller on the FTSE 100. The supplier of plumbing and heating goods directly exposed to the troubled US housing market said trading profit fell 25 per cent and market conditions looked set to worsen.

Lower down the market, Northern Rock rebounded 55 per cent to 100p after the government backed a proposal to convert the stricken bank's public loans of more than £25bn into bonds in a move that made a private sale of the company more likely.