FTSE: 5,068.95 (-178.04) Mid-250: 9,901.69 (-411.44) Small Cap: 2,892.57 (-77.34):The FTSE 100 fell for the seventh consecutive trading day yesterday, with investors continuing to drop stocks in favour of safer assets, unconvinced that governments and central banks have a grip on the global debt crisis.

Miners, banks and integrated oil stocks led London’s blue-chip index down 178.04 points, or 3.4 per cent, to 5,068.95, its lowest closing level since July 7th, 2010.

The FTSE volatility index, a gauge of investor fear, shot up more than 28 per cent, having risen all last week.

The sell-off since July 29th wiped $3.4 trillion off the value of world stocks, a sum equivalent to Germanys GDP. But the retreat on equity markets is still some way less pronounced than the crashes.

The European Central Bank yesterday bought Spanish and Italian bonds to halt contagion from the debt crisis in the peripheral euro zone nations, but that only briefly delayed a sell-off from a cut in the US credit rating by Standard Poor’s after the markets closed on Friday.

Weir fell 8.7 per cent, with traders citing a downgrade by Morgan Stanley hitting the engineer’s shares.

Analysts also said liquidity was playing a major role in the decline of Weir’s shares, which have fallen more than 27 per cent in the last 10 trading days. Citigroup said the market was pricing in a 27 percent earnings per share downgrade to its 2012 forecasts for the engineering sector.

Gold soared to all-time highs as investors fled to safety.

As an equity proxy for the precious metal, Randgold Resources, the only blue-chip riser, added 7.4 per cent, also supported by an upgrade in its investment rating by Deutsche Bank to “buy”.

Ted Scott, director of global strategy at FC, which has about £108 billion worth of assets under management, said equity markets offer investors valuation opportunities rarely seen over the previous 10 years.

He said the UK market is on an earnings yield of more than 11 per cent compared with a 10-year gilt yield of about 2.75 per cent and a negative equivalent real gilt yield, but appetite for risk just isn’t there.

“For a sustainable rally, the markets need to see a credible solution to the euro debt crisis, and until that happens, markets could fall further,” he said. – (Reuters)