London stock market drops more than 3%

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LONDON: London's benchmark FTSE 100 index dropped by more than 3.0 percent in midday trade Tuesday, mirroring falls elsewhere in Europe as investors sought cover from fresh banking troubles.

The FTSE 100 slumped 3.32 percent to stand at 4,907.29 points at around 1145 GMT, as France and Belgium sought to save Dexia bank, whose potential collapse threatens a fresh banking crisis.

"Investors are facing the real possibility that bank exposures to sovereign debt and an increasing shut down in interbank lending markets could trigger a new banking crisis," said Joshua Raymond, chief market strategist at City Index.

"Bank shares have seen high volatility which in itself is exacerbating investor fears and uncertainty over the crisis." Raymond added that traders were "selling a lot their holdings in banks in a protective move."