On yet another day of volatility, the FTSE 100 slumped lower to end 5.65 per cent down at 4,366.69.

The index started by tumbling to new lows on overnight falls on Asian stock markets but gradually started to recover on hopes the government rescue plan could revive the market.

After a shock announcement from the Bank of England at 12:00 BST that the interest rate had been cut 0.5 per cent, alongside a similar US measure, the FTSE shot up almost 200 points in ten minutes.

But despite the trans-Atlantic central bank measures, Wall Street showed no sign of recovery and the Dow Jones plunged almost two per cent on opening, sending shares down further in the UK.

Tim Hughes, head of sales trading at IG Index, said: “Of late, the one reliable constant in the misadventures of the globe’s financial markets has been substantial volatility, and today was no different, with the FTSE 100 opening way down before recovering in time for lunch and slumping, exhausted, later in the day.”

Despite topping forecasts and reporting an increase in sales for the second half this morning, sales in Sainsbury’s were down by 14.93 per cent by the end of trading.

The sale of a ten per cent stake in the retailer, held as collateral for a loan by Kaupthing and called in as the bank faced collapse, sent shares in Sainsbury’s lower.

Mining and energy stocks, which make up around a fifth of the value of the index, also weighed on the FTSE 100.

Vedanta Resources fell 14.78 per cent, while Petrofac was down by 11.76 per cent.

However, banking stocks benefited from the government bailout plan and HBOS finished almost 25 per cent higher than last night, while Royal Bank of Scotland rose 0.78 per cent to 90.7p following earlier falls to 72.60p.