FTSE falls 1.8% early on US plan uncertainty, WaMu

The UK's top share index fell 1.8 percent early on Friday, led by financials, as the fate of a $700 billion U.S. rescue plan remained uncertain and after U.S. authorities closed Washington Mutual in the country's biggest bank failure.
By 0726 GMT, the FTSE 100 was down 92 points at 5,105.0, after rallying 2 percent on Thursday on hopes that the bailout package would be approved by U.S. lawmakers soon. The UK benchmark has fallen nearly 21 percent so far this year.
Talks on the rescue for the U.S. financial system fell into chaos amid accusations that Republican presidential candidate John McCain scuppered the deal.
Adding to the gloom, Washington Mutual, the largest U.S. savings and loan, was closed by the U.S. government and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.
"We are not too concerned about failure to announce the package overnight. We think this is natural politics playing its hand in the run-up to the presidential elections," said Graham Secker, UK equity strategist at Morgan Stanley.
"We would expect some positive results from the discussions within the next few days. Obviously the market is very sensitive about what's going on at the moment."
But in a bid to ease market concerns, central banks across the world scrambled to meet a desparate demand for cash, both in their own currencies and the U.S. dollar.
Banks were the top-weighted losers on the FTSE 100, with the FTSE 350 banks index shedding 2.2 percent.
HSBC, Barclays, Royal Bank of Scotland, Lloyds TSB, HBOS and Standard Chartered were down between 0.9 and 4.3 percent.
Mid-cap Bradford & Bingley sank 14 percent.
Insurers also suffered, with Aviva shedding 2.3 percent, Old Mutual falling 5.6 percent and Prudential losing 2.1 percent.
Hedge fund group Man Group dropped 3.4 percent.
London Stock Exchange sagged 4.1 percent. The bourse said volatile markets boosted trading volumes in the first five months of its financial year, but also led to a steep drop in initial public offerings.
Energy stocks fell along with weaker crude prices. BP, Royal Dutch Shell, BG Group, Cairn Energy and Tullow Oil fell 1.3 to 3.3 percent.
Miners also took a beating, with BHP Billiton, Rio Tinto, Anglo American, Xstrata, Vedanta Resources, Kazakhmys and Eurasian Natural Resources losing 2 to 7.6 percent.
With the financial turmoil intensifying, retailers also took a hit. Marks & Spencer dropped 1.8 percent, Next sagged 3 percent, Kingfisher lost 2.9 percent and Tesco slipped 0.6 percent.