More than £28bn was wiped off the value of shares by midday as a result of heavy losses in Asia and New York and continuing woes among manufacturers in the UK and falling optimism in the service sector.

The FTSE 100 index of UK leading shares dived 158.6 points to 5585.3 at 1213 GMT while provisional volume for the whole market stood at 380.5m shares.

The stock market's losses worsened after two surveys revealed further economic woes.

According to the Purchasing Managers' Index, a survey on manufacturing activity, November order books have deteriorated to their worst level since recordings began.

And the Confederation of British Industry found that consumer business and professional services growth is expected to slow over the next three months.

The FTSE 100 index downturn was also on the back of expectations of further selling on Wall Street this afternoon.

"We aren't surprised that the market is down," said Jeremy Batstone, head of research at NatWest Stockbrokers.

"Profit-taking was inevitable after the market got back up to early summer levels.

"Traders are switching into bonds as forecast," he added. Among the biggest fallers of the session was Lloyds TSB after HSBC Securities cut its profit forecasts by 1.2%, 3.2% and 1% for 1998 to 2000 respectively.

While HSBC is keeping its add rating, it predicts pretax profit to fall to £3.26bn, £3.62bn and £4.06bn.

Shares in Lloyds reversed 35.5p, or 4.2%, to 807p at 1233 GMT.

The changes were on the back of a range of factors including lower dealing profits.

Other banking stocks were also hit by the market sell-off with Asian-linked stock HSBC finding itself 98p off, or 5.9%, at £15.42.

NatWest was also down 50p, or 4.5%, to £10.56.

Hays continued its aggressive European expansion programme after the distribution and commerical services group bought French courier and postal service Financiere Saint Augustin for up to £21.2m.

The downbeat mood on the market, however, eroded shares and the stock fell 7p to 505p.