FTSE tumbles on banks woes

The FTSE has plunged in mid-afternoon trading with banking stocks hard hit after Santander released poor results and the impasse over the US debt ceiling shows no sign of ending.

Shortly after 3.30pm, London's leading share index was 1.14% in the red, down 68 points to 5,862.

Semi-nationalised bank Lloyds was down 4.6% with Barclays and Royal Bank of Scotland both 3.4% off the pace.

Investors took fright after Spanish banking giant Santander earlier reported its UK's profit before tax was down 3% for the six months of 2011. 

Insurer Aviva was also down 2.8% as investors fretted over the company's exposure to a possible US default.

The FTSE's woes were mirrored throughout Europe, with France's Cac 40 down over 2% and Germany's Dax 1.75% in negative territory.

In the US there appeared to be no breakthrough in negotiations to raise the debt ceiling before the 2 August deadline, with neither Republicans nor Democrats giving ground on their debt reduction plans.

The Dow was down 1.1% to 12360. Industrials, in particular, were weighing on the index with Caterpillar and Alcoa leading the downward charge.