The London Stock Exchange’s FTSE-100 benchmark index dipped below the key 5000-point level for much of the session yesterday amid renewed concerns about the health of the banking sector after Royal Bank of Scotland received more government help.

The Foostie ended the session 60 points, or 1.2%, weaker at 5044.50.

Royal Bank said that it was taking an additional £25bn from the government and joining the government’s Asset Protection Scheme. Meanwhile, Lloyds confirmed it was looking to raise at least £21bn through a record share issue and debt swap, instead of joining the insurance scheme.

As a result, the pair faced differing reactions in the markets. While shares in Royal Bank of Scotland slid 5.9%, Lloyds shares gained 3.4%.

The market largely ignored good news elsewhere in the economy. The Halifax financial group said UK house prices increased for the fourth month in a row during October, rising by 1.2%.

The average cost of a UK home is now 7.1% or £11,000 higher than when house prices hit their low point in April, according to Halifax.

But the group warned the recent run of strong price rises could be coming to an end as increasing numbers put their home up for sale.

Eurozone markets were jolted by news that Swiss bank UBS booked another massive charge. Separately, the European Commission in Brussels said losses at European financial institutions may total as much as €400bn and the industry remains “fragile”.

Germany’s DAX index fell 66.36 points, or 1.2%, to 5364.46. The CAC-40 in France was 49.62 points, or 1.4%, lower at 3589.84.

On Wall Street, the Dow Jones industrial average and the broader Standard & Poor’s 500 slid after the opening bell. Uncertainty about a raft of key economic announcements later this week, culminating in Friday’s crucial US payrolls report, kept a lid on sentiment, too, though the $34bn takeover of the Burlington Northern Santa Fe rail group by Warren Buffett’s Berkshire Hathaway helped ease the selling pressure.

The Dow later closed 17.53 points lower at 9771.91.

Many analysts think global share markets are at a crucial juncture and that stocks, which have rallied for most of the year, could be facing a year-end slide.

“At the moment, it seems traders do not have the same conviction they have displayed previously and rallies from here are proving to be unsustainable,” said David Jones at IG Index.