The FTSE 100 has ended the day more than 5 per cent down, despite a brief respite sparked by an emergency interest rate cut.

The index finished the session 238.5 points down at 4366.7 - its lowest level since August 2004 - after earlier plunging to 4245.3. By 5.30pm, the Dow Jones Industrial Average was 215.05 points off at 9232.06 on Wall Street.

For the first time since the aftermath of the September 11 terror attacks, and mirroring similar action by central banks in the US, Canada, China, Switzerland and Sweden as well as the European Central Bank, the Bank of England announced an emergency rates cut, by 0.5 per cent to 4.5 per cent.

Prior to this, Chancellor Alistair Darling announced a £50 billion bank bail-out plan to shore up British financial institutions which saw eight banks and building societies - including HBOS, RBS, Barclays, Lloyds TSB and Nationwide - sign up to an initial £25 billion rescue scheme.

The Government said it is ready to make at least another £25 billion available for other eligible institutions. And in an effort to kickstart stalled money markets, the Bank of England said it was offering at least £200 billion in short-term lending while also guaranteeing up to £250 billion to help banks refinance debt.

By close of play, Barclays shares were 6.75p to 278.25p, with Lloyds TSB down 15.5p at 210p, Royal Bank of Scotland 0.75p up at 90.75p and Halifax Bank of Scotland up 23p at 117p.

Other banks fared poorly amid uncertainty about their level of exposure to the government's proposals, in particular any dilution threat to existing stakes and possible curbs on future dividend payments. Standard Chartered, which has no plans to issue any new capital, fell 151p to 1160p while HSBC was off 22.75p at 878.25p.

Despite the rate cut, supermarket giant Sainsbury's was the FTSE's biggest casualty, down 15 per cent or 47p to 267.75p.

The fall came amid speculation that investor Robert Tchenguiz has offloaded his 10 per cent stake in the group. Analysts also feared its like-for-like sales jump of 4.3 per cent for the 16 weeks to October 4, which was slightly better than market expectations, could be hard to beat.

Marks & Spencer had enjoyed some gains but succumbed to the market blues, going on to lose 9p to 220.5p. Elsewhere, Thomson holidays owner TUI Travel managed to rise 8.25p to 212p, with Premier Inn firm Whitbread adding 29.5p to 986.5p.

Hopes for a revival in the house market saw housebuilders featuring high up the FTSE 250 Index gainer's board. Bellway was 56.75p higher at 540p, while Charles Church owner Persimmon leapt 28p to 400.75p. Debt-laden Barratt was not so fortunate, slipping 1.25p to 91.75p.

Miners were under severe selling pressure amid a downturn in commodity prices. Vedanta Resources was a major FTSE faller, down 141p to 864p.

And oil falling to 12-month lows around 86 dollars a barrel weighed down energy firms like Tullow Oil, which closed down 63p to 482.5p.

The FTSE winners were HBOS, TUI Travel, Whitbread - up 29.5p to 896.5p - and ICAP, which closed up 8p at 336p.

The losers were Sainsbury's, Vedanta Resources, down 141p to 864p, London Stock Exchange down 102p to 712.5p, and Petrofac which ended the day down 56.5p at 424p.

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