London stocks had to endure another bout of weakness yesterday, with the FTSE 100 index dropping back below 5,000 on a number of occasions before stabilising and finishing marginally above that figure.

Already burdened by concerns over an expected barrage of weak US economic data and worries that more pension funds might follow Boots' lead in switching out of equities and into bonds, the market ran into fresh selling, prompted by growing fears that Argentina might default on its debt burden.

Those concerns, mixed with ever present worries about the war on terrorism and some confidence-sapping company news, saw all the main UK indices under constant pressure.

If there were any doubts about the pace of decline in the US economy, they were dispelled by the startlingly weak October consumer confidence index, which came in at 85.5, compared with September's 97 figure and a consensus forecast of 96.7.

Even worse than the FTSE 100 was the performance of the FTSE 250, which dropped another 99.1 points to 5,323.3. The worst of all the top indices was the Techmark 100 index which dropped 44.92, or 3.2 per cent, to 1,338.3.

The bad news affecting the market came from engineering group GKN and 3i, the UK's biggest venture capital group. The latter led the FTSE 100 losers list, after announcing the closure of seven of its offices across Europe and axing 185 jobs due to "current uncertain conditions".

GKN issued a profit warning and also disclosed its intention to chop 1,250 jobs. But the strategy team at Morgan Stanley felt sufficiently confident to recommend clients to go overweight in UK equities.

The bank said: "Poor economic and earnings news may provide some short-term uncertainty. However, we feel confident that equities will perform strongly on a six-month view and upgrade to an overweight position."

The broker shifted its recommendation on banks to "underweight" and moved hotels, restaurants and leisure to "overweight".

Turnover in equities was two billion shares.