More bad news from the far east demolished any chance that UK shares could build on their impressive performance earlier in the week.

The bankruptcy of one of Japan's leading food and commodities trading companies, Toshoku, was a reminder of the immense problems surrounding the region and drove the Tokyo market down over 5 per cent. Other leading far eastern markets, including Hong Kong and Seoul, also suffered significant falls.

That weakness, coming in the wake of a poor performance by Wall Street on Thursday set the scene for a dismal showing by London's equity market, along with most other European bourses.

The Dow Jones Industrial Average sustained a three-figure fall overnight, with investors fretting about the potential impact on US corporate earnings of the continuing weakness of far eastern markets and the ever-growing list of bank and broking company failures in the region.

And there was more trouble for London with the Dow taking a further big hit at the start of trading yesterday.

At the close of a turbulent session, the FTSE 100 index was left nursing a 148.1, or 2.9 per cent, decline at 5,020.2, wiping out the big gains recorded at the beginning of the week.