London's equity market had to contend with another nerve-jarring shock yesterday as Prudential shares plummeted, adding to the stresses imposed on the FTSE 100 by plunging technology stocks in the face of the latest profit warning.

The fall in Pru shares followed an agreed bid for American General Corporation, one of the big US insurance groups. The market's knee-jerk reaction to the news was to chop the Pru share price amid fears that the UK group had overpaid, plus concerns that the deal will see a big flow back to the UK of Pru shares issued to AG holders.

Apart from the Pru story, it was another grim session for London as the institutions continued to shy away from the market following last Friday's big sell-off on Wall Street, which was triggered by the warnings issued by Intel and National Semiconductor and the big job losses announced by Cisco.

Ericsson, the Swedish telecom equipment group, was the latest company to issue a profits warning yesterday, citing weak mobile phone sales.

The battering of the market's already fragile confidence saw the FTSE 100 in full retreat and down 90.8 at 5,826.5, its lowest closing level since February 1999. At its worst of the day the index dropped back below the 5,800 level to hit 5,786.3, a fall of 131.0.

It was a similar story for all the main indices, none more so than the Techmark 100, where last week's tentative rally was blown away by the never-ending series of warnings from the technology sector. The Techmark index lost another 81.37, to an all-time low of 2,227.37. That is 61 per cent down from the peak a year ago.

The FTSE 250 lost 93.6, or 1.4 per cent, to 6,483.0, burdened by dramatic falls in stocks such as Bookham Technology, whose shares plunged almost 19 per cent. The SmallCap ran back 51.4, or 1.6 per cent, to 3,093.4.

Commenting on the market's wholesale retreat and possible support levels, one technical analyst saw support for the Nasdaq at 1,700 "as a logical assumption; last week's rally was bear closing and buyers haven't reappeared. The market is being overwhelmed by bad news". He said there was still around 200 points of potential downside for the FTSE 100.

The main hope for equity bulls lies in an interest rate cut from the US Federal Reserve when its open market committee meets next week. Most economists are looking for a half point off rates, the third such cut this year.