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The FTSE 100 continued its decline this morning – heading to lows last seen in 1996.

Yesterday the index dropped 5.33 per cent, and after a brief fillip this morning the index continued its decline.

At 11:38 GMT, the FTSE 100 stood at 3,567.13 – a drop of 58.70 points or 1.62 per cent.

Last night on Wall Street the Dow closed down 4.24 per cent to 6,763.29 – falling below 7,000 for the first time since 1997.

The drops followed record losses for AIG yesterday and a slump in profits for HSBC.

Joshua Raymond, market strategist at City Index, stated the initial rise was due to investors "hoping for a dead cat bounce.

"We need to find a bottom and quickly before investors lose all faith in the market.

"The timing of the falls over the last few weeks in the FTSE now gives the [Bank of England] an opportunity this week to restore that faith. We are looking at six-year lows right now. We can ill afford to be looking at 12-year lows like our US partners."

Today in London, the greatest losses at lunch were seen for miner Xstrata – down 7.20 per cent after its cash call was approved last night by shareholders, but not before many investors expressed their disapproval of a deal to sell one of its mines to Glencore.

Barclays and Lloyds Banking Group were down 6.73 per cent and 6.28 per cent – amid uncertainties over the whether they will sign up to the government's Asset Protection Scheme.

Leading the gains were insurers Amlin up 3.35 per cent and Admiral up 2.17 per cent.

Standard Chartered rose 2.04 per cent as it reported a 17 per cent rise in profits driven by wholesale banking.

Defensive pharma stocks GlaxoSmithKline and AstraZeneca also saw modest gains.