Share prices have fallen again on the London Stock Exchange after investors continued to shun the market.

Investors are looking at this market and thinking - why buy now?

Alex Scott, Seven Investment Management

Worries over global economic prospects and the possibility of war in Iraq helped to push the main FTSE index below Monday's six-year low.

Concerns over the financial health of UK companies also helped to depress share prices.

The FTSE 100 index of leading UK shares closed down 68.3 points at 3,671.1, a fall of 1.8% and the lowest closing figure since December 1995.

And hopes of a rebound in trading on Wednesday were hit by a sharp fall on Wall Street.

The benchmark Dow Jones industrial average closed on Tuesday down 189 points at its lowest level for almost four years.

"Investors are looking at this market and thinking - why buy now?" said Alex Scott, an equities analyst at Seven Investment Management.

Banks suffer

At one point the FTSE 100 was down nearly 130 points, but it recovered in afternoon trade after better-than-expected consumer confidence figures were released in the US.

Bank shares came under pressure once again, as investors feared they could suffer most from an economic downturn.

Shares in Barclays closed 3% lower and HBOS shares fell 2.7%.

"People are jittery about credit risk, and the selling is taking on a life of its own," said Robin Down, UK bank analyst at Morgan Stanley Dean Witter.

"The values we are seeing today have lost track of fundamentals: the UK economy is still healthy, and corporate receivership numbers have barely budged."

Insurance companies saw heavy losses during morning trade, but an afternoon recovery reversed many of the losses.

Royal & Sun Alliance ended the day down 1.6%, while Aviva managed to rise 1.1%.

Shares in AstraZeneca fell 4% after the company said there were clinical design issues relating to its new cancer drug Iressa.

The worst performance in the FTSE 100 came from the building equipment firm Wolseley. Its shares fell 12% on worries about asbestos litigation in the US.