London stock market down as recession fears grow

By mid-morning, the Footsie was 3 per cent down at 3,960.8, with all sections of the leading blue chip index affected by the fall, analysts said.

In early trading, the index fell by 5 per cent, after closing 7 per cent down Wednesday.

Analysts said markets were nervous about recession indicators and the apparent continuing reluctance of banks to lend to each other.

"There is a lot of talking but little action," one analyst said.

Continuing speculation that the government's bank bail-out package of 37 million pounds (64 million dollars) might not be enough, or may have been reworked, added to investors' uncertainty.

Halifax Bank of Scotland (HBOS), the mortgage lender expected to be taken over by Lloyds TSB, saw its share price plummet to 83 pence amid speculation that the merger agreement could implode.