Holding shares in the big banks should come with a health warning these days. HSBC, Europe's biggest bank, slumped 24% last week, wiping £15 billion from the company's stock-market value.

The slide continued in Hong Kong this morning, with the price tumbling to its lowest in 13 years as hedge funds began shorting the shares ahead of going ex-rights later this week.

That selling spilled over into London, where HSBC's price slumped 27¾p to 333p. Dealers said that the short sellers were being motivated by the likelihood of HSBC shares continuing to weaken in the wake of its deeply discounted rights issue to raise a record £12.5 billion at 254p.

But the early focus of attention was on Lloyds Banking Group after it reached agreement over the weekend to join the Government's asset-protection scheme relating to £260 billion worth of dodgy assets. Lloyds, in which the Government now has a 77% majority stake, lost 3.3p at 38.7p.

Goldman Sachs says Lloyds is now "substantially" less risky, but warns it comes at a price of considerable dilution. Deutsche Bank says participation in the scheme materially improves capital ratios in the short term and buys the bank precious time. But weak profits and a sliding capital base will keep investors apathetic. It has repeated its sell rating and 35p target. Bernstein has slashed its target for Lloyds from 110p to 50p, but keeps its market perform rating, while Nomura rates the shares reduce with a 42p target.

The Lloyds share price has collapsed from around 260p since September when the merger with rival HBOS was announced. Lloyds reported last week that HBOS lost a massive £10.8 billion last year. Barclays, which has to decide soon if it wants to join the Government protection scheme on assets, fell 7.2p to 57.6p. Another loser was Standard Chartered, down 44p at 708½p.

The continuing banking-sector turmoil acted as a drag on the rest of the market, which hit a new six-year low. The FTSE 100 index, which fell 300 points, or almost 8%, last week, was on the slide again, losing a further 58.07 at 3472.66.

Wall Street was greeted with a futures-related sell-off this afternoon as investors continued to reflect upon Friday's disastrous non-farm payrolls. The Dow fell 54.96 to 8571.98.

Traders say the dramatic fall in the stock market during the past couple of weeks suggests life assurers may soon have to liquidate parts of their portfolios to preserve solvency ratios. Legal & General shed a further 2.4p at 22.4p and is now regarded as just traded-options money. There were also losses for Prudential, down 9.95p at 199.3p, and Friends Provident, 2.6p at 55.1p. But Aviva bounced off the bottom with a rise of 6.7p to 170p, despite the threat of a credit-rating downgrade by Moodys.

Shares in the London Stock Exchange fell 42p to 362¼p after Nomura cut from buy to neutral and lowered its target from 600p to 560p. It favours Deutsche Börse instead. Morgan Stanley has slashed its target for miner Anglo American from 1450p to 1235p, while slashing rival Xstrata from 750p to 330p. The broker has made its move on Xstrata, 19¾p off at 304¾p, to take into account the rights issue, and Anglo American, down 46½p at 964½p, to reflect full-year earnings.

Stand by for some better-than-expected full-year results tomorrow from Mears, the social-housing builder and care-homes operator, up 2½p at 247½p. Pre-tax profits should come in at around £20 million, up from £15.45 million last time. Celebrations for chairman Bob Holt may continue later this week with Mears' inclusion for the first time in the FTSE 250 index.

Builders also attracted support. Bovis Homes put on 19p at 397p following full-year results which dealers judged could have been a lot worse. Berkeley Group rose 35½p to 911½p after UBS tweaked its target 22p higher to 1087. The broker says Berkeley is in a position to take advantage of land-buying opportunities without reverting to borrowing from the banks.