BLUE-CHIP shares tumbled yesterday as investors endured another dismal session on the London market.

With just under an hour's trading left, the FTSE 100 Index of leading shares was off a hefty 111.5 points at 3746.5. The session closed with the index closing down 80.9 at 3777.1.

Earlier in the session it had slumped even further, at one point falling a massive 190 points as it crashed through the 3700 level.

That meant traders had been facing the possibility of another record close for the top flight - the last time a session finished below 3700 was July 30, 1996.

London was rocked by fragile confidence and nervy investors steering clear of the rough conditions.

A rollercoaster ride on Wall Street also failed to soothe nerves, with the Dow Jones Industrial Average diving 169 points before charging into the black.

Tom Hougaard, chief market strategist at financial bookmakers City Index, said: "Traders who have studied stock market history know what damage is still possible in this bear market.

"The hallmark is a continual grind day after day after day. This is what we are witnessing right now."

The housing market also showed signs of slowing down during July, figures showed yesterday.

Average prices increased by 1.2 per cent in England and Wales during the month, - lower than June's rise of 1.8 per cent and well down on May's 2.6 per cent jump.

But property website hometrack said a shortage of homes coming on to the market suggested there were further rises to come, although it added that the rate of increase looked as though it was slowing down.

So far this year, prices have risen by 11.8 per cent, and the group predicts the cost of a home will have soared by 20 per cent by the end of the year.