FTSE Slides 5.3% To Lowest Closing Level In 6 Yrs

Barclays, Royal Bank of Scotland, Lloyds Banking Group and Standard Chartered sank between 2.6 percent and 15.3 percent.

 Britain's top share index slid 5.3 percent on Monday to its lowest closing level in nearly six years, led by financials after HSBC's plan of a deep-discount rights issue and AIG's huge quarterly net loss.

The FTSE 100 closed 204.26 points lower at 3,625.83, extending Friday's 2.2 percent losses. The UK benchmark had lost 7.7 percent last month and is down 18 percent for the year, after posting its worst annual drop in 2008 since its launch in 1984.

European stocks also finished the day sharply lower.

Banks took the most points off the UK index as HSBC, Europe's biggest bank, tumbled nearly 19 percent to its lowest closing level since October 1998.

The bank booked an 18 percent fall in 2008 adjusted pretax profit and announced a cut in dividend and a deeply discounted rights issue to raise about 12.5 billion pounds ($17.60 billion).

Barclays, Royal Bank of Scotland, Lloyds Banking Group and Standard Chartered sank between 2.6 percent and 15.3 percent.

"This is a market running very, very scared," said Howard Wheeldon, senior strategist at BGC Partners. "There is just no good news out there."

American International Group reported a $61.7 billion fourth-quarter loss, the largest quarterly loss in U.S. corporate history, and reached a new government bailout deal after officials concluded the insurer was too big to be allowed to fail.

UK life insurers were mostly lower, with Prudential, Old Mutual, Standard Life and Aviva down between 5.7 percent and 12 percent.

Amlin was one of the four gainers, up 2.3 percent after the insurer lifted its dividend and said the outlook for underwriting was improving. Motor insurer Admiral Group was also 2.3 percent higher ahead of the release of its results on Tuesday.

"The capital raising from HSBC is obviously a major market focus," said Darren Winder, equity strategist at Cazenove.

"The big picture is still one of a profit picture which is under strong downward pressure and people are finding it very difficult to get comfortable with valuations against that sort of backdrop."

HSBC's huge rights issue and further government funding for AIG pushed sterling lower against the dollar.

COMMODITIES WEIGH HEAVILY

Commodity stocks were another standout faller on the UK index as prices in oil and metal slipped.

Oil majors BP and Royal Dutch Shell sagged 5.7 percent and 6.2 percent, respectively, while BG Group, Cairn Energy and Tullow Oil dropped between 3.2 percent and 5.5 percent.

Among the miners, BHP Billiton, Rio Tinto, Anglo American, Xstrata, Kazakhmys and Vedanta Resources fell between 4.9 percent and 8.7 percent.

Mid-cap property stock Segro plunged 24 percent on fears it would soon launch a deeply discounted rights issue. British Land slumped 12.6 percent, while Land Securities shed 9.2 percent.