The gloss has come off the market this morning after poor results last night from US insurance giant AIG spooked investors in financial stocks.
All the talk about the end of the credit crunch now looks a little complacent, in the light of a record quarterly loss from the world's biggest insurer. AIG lost $7.8bn, partly due to a $9bn charge for writing down the value of credit derivatives. It is also raising $12.5bn and its finance director is going.
So UK financials are under pressure. Royal & Sun Alliance is 4.6p lower at 139.3p, Aviva has fallen 17.5p to 629.5p and Friends Provident is 2.8p lower at 116.2.
Banks are also down, with Barclays losing 13p to 450p ahead of next week's trading statement. Everyone is agreed Barclays will have to raise new capital. The question as yet unanswered, is how.
With Wall Street forecast to open 100 points lower the FTSE 100 is now down 92.4 points at 6178.4.
Martin Slaney, head of derivatives at spread betting firm GFT, said: "Just when the markets were starting to believe we were through the worst of the credit crisis, horrendous figures from AIG have touched the credit crunch nerve once again. Investors are also being unnerved by the constant record highs in crude and the potential toll this may have on consumer spending.
"Vague talk that a major European bank could be about to post a €1bn derivatives loss are generally being dismissed as a Friday rumour, but nevertheless it's adding to the nervousness."
Carphone Warehouse lost 19.5p to 269.5p as investors decided they were not keen on the company moving into the struggling consumer electronics market in partnership with US group Best Buy.
Pubs are lower after all the excitement earlier this week after Enterprise Inns, down 22.5p to 476.5p, said it had been given permission to convert into a tax-efficient real estate investment trust.
JP Morgan issued a downbeat note on the sector. It said: "The news from Enterprise Inns that it can qualify as a reit has caused a sharp jump in share prices across the sector. Whilst the move for Enterprise and Punch Taverns looks to be justified we think that investors are now likely to re-focus on fundamentals. We are today cutting our 2009 full year forecasts by 5-8% to reflect a slower rebound from the smoking ban and ongoing cost pressures for the pubs."
