Market report - Thursday Update: Big movements in share prices in the last hour of trading have become a regular feature of stock-market trading in recent days, and could lead to increased volatility in the weeks ahead.

The FTSE 100 index's losses more than doubled to 202.8 points, or almost 5%, in the final 60 minutes yesterday and there were further major losses to digest this afternoon. Wafer-thin trading conditions were partly to blame, but Liverpool Victoria Asset Managers' Alan Capper says the moves are mostly driven by fear.

He warns that in these high-speed global markets, investors and traders are too scared to run positions overnight in case bad news from New York or Tokyo prompts a further sell-off in London the next morning.

"Unless traders want to remain awake all night, they have little choice but to shut down any remaining open positions they have in the market," he adds.

This practice is often seen on a Friday night, with traders unwilling to run long positions over the weekend, but it has never before been seen on a daily basis - such is the extent of investor nervousness created by the credit crunch and global recession.

After London's sell-off yesterday, shares were on the slide, diving back below the 4000 level again, leaving the Footsie 100 down 188.8 points at 3816.8, its lowest since April 2003.

It was matched by fresh falls on Wall Street this afternoon, where investors had to cope with a disappointing Philadelphia Federal Reserve survey, a big rise in jobless claims to their highest in 16 years and a slump in Citigroup's share price to record lows. The Dow was down 208.9 at 7788.36. Moving against the trend were the banks, including the three secured in the Government lifeboat. Lloyds TSB rallied 6.9p to 125.4p. Its shareholders have already voted overwhelmingly in favour of the Government-sponsored takeover of HBOS, up 4.3p at 68.6p. Today, shareholders of the Royal Bank of Scotland, up 3.3p at 45.6p, were voting on its proposed £20 billion Government refunding plan.

The latest stock-market slump has renewed fears about the solvency ratios of the big insurance companies. If the value of their holdings falls too far, they may be forced to sell stock into the market. As a result, Aviva lost 62¼p to 289½p, Prudential 49¾p at 244¼p and Legal & General 8.7p at 61p. Dealers said there were falls of up to 40% in the big insurers overnight on Wall Street.

Retail sales declined just 0.1% last month, confounding analysts who had pencilled in a fall of 0.5%. They still believe the run-up to Christmas will be difficult for retailers which are already fighting rising costs and falling sales. They say the buoyancy of figures in central London may have been distorted by Continental shoppers looking to take advantage of the euro's strength against the pound.

Marks & Spencer rallied from an opening fall to trade 4p higher at 204p after launching a 20%-off sale. There were gains for fashion outfit Next, up 12½p at 942½p, and Debenhams, 2p to 25¾p, which is also cutting prices in its shops. Dealers say stock-market bears may have begun closing short positions in the department stores chain after the shares touched a low of 23¾p.

Halfords responded to positive first-half numbers with a rise of 16p at 239¼p. Dresdner Kleinwort says Halfords will continue to increase its market share and has repeated its buy rating and 300p target. Dresdner has raised Mothercare, up 10p at 278½p, from hold to add on the back of results.

Cazenove concedes there are likely to be more earnings downgrades of oil companies to reflect lower oil prices and falling demand. But payouts to shareholders in a stock market hungry for dividends mean it intends to remain overweight in the sector.

BG Group, down 49½p at 757½p, and BP, 30p cheaper at 458p, continue to be its top picks.