The FTSE 100 fell further today – dropping towards the 3,500 level.

After a morning ‘dead cat bounce’ the index dropped firmly over the day.

At close the index stood at 3,512.09 – a drop of 113.74 or 3.14 per cent – following yesterday’s 5.33 per cent fall.

The FTSE 100 has now dropped from holding over the 4,000 mark to looking at 3,500 in the space of seven days’ trading.

In New York, the Dow Jones held firm for much of the morning trading, before heading south into lunch. At 11:48 EST (16:48 GMT) the index was down 0.57 per cent to 6,724.98.

In London, Standard Chartered led the gains – up 6.98 per cent after breaking the financial model and seeing profits rise.

Retailer Kingfisher gained 4.63 per cent, while insurers Amlin and Old Mutual climbed 3.99 per cent and 2.31 per cent respectively.

Lloyds Banking was down 9.72 per cent to 44.60p as uncertainty over whether it will sign up to the government’s Asset Protection Scheme.

Cairn Energy and International Power fell 8.11 per cent and 7.91 per cent respectively, while Prudential was down 7.75 per cent

Anthony Grech, market strategist at IG Index, said: “A brief rally in the UK this morning turned out to be nothing more than an opportunity for some investors to get out at higher prices before the market headed south again.

Since 09:00 GMT, the FTSE has spent most of the day in decline, with the index edging towards the 3500 level – a fresh multi-year low.”

He explained confidence has been knocked by news the US may need to provide aid to its banking system over and above the $700 billion already agreed.

“It is this sort of revelation that continues to knock investor confidence, just when you think it can’t get any lower. The economy is not going to deteriorate for ever, and at some point markets will turn again, but at the moment there is just no compelling reason for investors to start buying,” Mr Grech said.

“The view is still that share prices could be a good deal cheaper tomorrow or the next day.”