Mar. 3--Dreams of a rally by London stocks proved short-lived today as the FTSE 100 index crashed back below the 3600 support level to trade at a new six-year low.

Support levels have dropped like ninepins in the past few days as the bad news continues to seep out of the financial sector.

The Footsie briefly touched 3676.86 before again slamming into reverse and closing with a loss of 113.74 points at 3512.1 as it mirrored movements in the Dow future. Its loss on the year to date is now 849.7 points, or 19 percent. Wall Street traded below its best levels following an early mark-up, with the Dow's lead cut to 31.63 at 6794.28.

The queue of companies begging for more cash getting longer, and the number of blue-chip firms cutting dividends is starting to grow at an alarming rate. That means there is less cash available to be reinvested into the market.

Dealers warn this could have serious longer-term repercussions for investors. Short-covering of HSBC which rocked the City yesterday with a big drop in profits and a cut in the dividend, proved temporary, the shares retreating a further 2p to 397p.

UBS has cut its target for Europe's biggest bank from 700p to 520p to reflect the higher cost of capital and lower returns on invested capital. But the broker points out the bank is still making a profit, unlike most of its rivals, and is sticking with is buy rating.

UBS has reduced Lloyds Banking Group, down 3.9p at 45 1/2p, from 140p to 100p to reflect the higher impairment charges in its HBOS subsidiary's corporate book.

But it says the shares remain a buy. Barclays touched 76.5p amid whispers it had received another regular visit from the Bank of England. The fall was later reduced to 5.9p to 81.8p.

BP fell 18 1/4p to 404 1/2p following a presentation to institutional investors. The oil giant confirmed it had no plans to cut the dividend, but remained uncommitted about the its future rate of growth.

Some brokers recently fingered BP as the next blue-chip to be forced to make a cut to conserve cash. It paid out £6bn last year.

But others point out that even if the payout was cut by 20 percent, the shares would still yield more than 6 percent.

Meanwhile, Bernstein research has dropped its rating on BP from outperform to market perform. It recommends switching into Tullow Oil, down 37 1/2p at 667 1/2p, or BG Group, which shed 56 1/2p to 893 1/2p.

Property giant British Land traded below its best levels with a fall of 6 1/4p to 393 3/4p. Rival Land Securities dropped 12p to 486 1/4p after touching 486 1/4p. Both are due to go ex-rights following almost £1.5bn of fundraising in recent weeks.

Xstrata lost 7 3/4p at 332 3/4p after going ex the miner's £4.1bn rights issue as trading in the nil-paid got under way at 128p.

Dealers say the price of the nil-paid is being affected by a large number of short positions among the ordinary shares.

Some institutional investors have protested about the group's cash raising and $2bn (£1.4bn) takeover of Prodeco from Xstrata's biggest shareholder, Glencore. The acquisition enabled cash-strapped Glencore, with a 35 percent stake in Xstrata, to take up its rights entitlement.

RSA Insurance dipped 2.4p to 136 1/2p despite Morgan Stanley raising its target from 167p to 181p following full-year results last week.

On Aim, Burst Media firmed 0.5p to 5.37p after admitting it had received and rejected an unsolicited bid approach in January, at between 6.3p and 7p a share.

Oil and gas explorer Elixir Petroleum, down 0.63p, has become the latest in a wave of companies to cancel its Aim listing. It blamed the additional regulatory compliance burden, and said costs incurred in maintaining a secondary listing on Aim exceeded the benefits. Elixir also complained about the low volume of trading in its shares on Aim.

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