The latest bout of weakness in Far Eastern currency and stock markets cast a shadow over London shares yesterday, driving the FTSE 100 index back below the 4,900 level.

It was similar weakness in Far Eastern markets that provided the spark for the big sell-off in global markets in the middle of the month, when the Dow Jones Industrial Average plunged 247 points, or 3.1 per cent and Footsie 125 points, or 2.5 per cent.

London was briefly bolstered by a relatively firm opening performance by US Treasury bonds, despite a sharp upward revision in second-quarter US gross domestic product growth.

But a steep opening decline on Wall Street, where the Dow Jones Industrial Average dropped over 120 points shortly after the start of trading, put paid to any chances of London recouping its lost territory.

Footsie was left nursing a 61.5 point, or 1.3 per cent, fall at 4,845.4, suffering mostly from a steep decline in the three stocks closely linked to the Pacific Rim, Cable & Wireless, HSBC and Standard Chartered Bank.

Losses in those three stocks ranged from 3 per cent in Cable & Wireless, to 7 per cent in HSBC and 10 per cent in Standard Chartered, and accounted for almost half the fall in the Footsie.

Falls in the market's second-liners and small caps were much less severe, although dealers said any follow-through selling in the leaders would inevitably feed through to the rest of the market.

The FTSE Mid-250 settled 28.2, or 0.6 per cent, off at 4,621.4 and the SmallCap index ended 5.0 down at 2,247.8.

Weakness in the Far Eastern markets took some time to erode London's initial confident performance.

That had seen Footsie up over 15 points in response to a reasonable showing on Wednesday by Wall Street.