A shock 1.5 per cent cut in the interest rate saw the FTSE 100 Index plummet by 258.3 points at 4272.4.

The drastic move stunned stock markets and wiped more than £62.3 billion, or nearly 6 per cent, from the London market as it brought home the growing prospect of a prolonged recession.

And downbeat retail sales and employment figures from the US added to the gloom.

Businesses cheered the Bank of England's decision, but the market reaction suggested attentions had now returned to the state of the UK economy.

CMC Markets trader Jimmy Yates said: "The fact the BoE jumped in with a huge 150 basis point cut certainly gave the market a wake-up call."

High street giant Marks & Spencer was one of a handful of blue-chip stocks in positive territory amid hopes the cut could tempt consumers back into the shops. It was the FTSE's leading riser, up 8p to 252.75, or 3 per cent.

Elsewhere in the top-flight, however, trading screens turned red. Hedge fund Man Group was the biggest casualty after it revealed the global financial turmoil had knocked nearly a quarter off interim profits and left assets under management lower than forecast.

Shares in the group plunged 31 per cent or 122.25p to 270p.

Investors also dumped commodities stocks on the latest recession concerns, with mining firms littering the fallers' board. Eurasian Natural Resources was the biggest casualty, off 69.25p at 289.75p.

Crude oil shed $4 to $61 dollars a barrel, leaving BP 30p lower at 493p and Royal Dutch Shell 125p lower at 1647p.

Banks remained under pressure despite the rate boost, with a note from Credit Suisse still weighing heavy on sentiment after it said trading for UK banks was deteriorating at a faster than expected pace.

It lowered its target price for Lloyds Bank Group, which includes HBOS, and warned Royal Bank of Scotland could make a loss in 2009 as well as this year.

Lloyds TSB slumped 10 per cent or 21.15p to 187.6p and HBOS fell 10.25p to 103.5p, while Royal Bank of Scotland was down 5p at 64p, a fall of 8 per cent.

Winners: M&S up 8p at 252.75p, Old Mutual ahead 1.7p at 55.3p, International Power up 7.25p at 263.5p and Cobham ahead 3.9p at 192.9p.

Losers: Man Group down 122.25p at 270p, ENR off 69.25p at 289.75p, Invensys down 29.5p at 138.1p and Rio Tinto off 442p at 2506p.

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