By Sarah Turner

London shares fell heavily on Friday, with the top index trading firmly below the key 4,000 level, as banks and mineral extractors paced a market-wide sell-off.

The U.K. FTSE 100 index fell 2.9%, or 116.37 points, to 3,902.00, with losers outnumbering decliners by more than a 4-to-1 rate.

The index has been trading around the 4,000 level this week but has managed to close above this key level every day so far. The last time it closed below 4,000 was in November last year.

Unlike shares trading elsewhere in Europe, the FTSE 100 managed to stay above 2008 lows on Friday.

Across the Atlantic, U.S. stocks extended losses made Thursday when the Dow Jones Industrial Average finished at a level not seen for more than six years with financials fronting the decline.

Banks also fell in London on Friday, giving back some of the previous session's sharp gains.

HSBC Holdings (HBC) fell 3.9%, Royal Bank of Scotland declined 8.3% and Barclays (BCS) dropped 5%.

The moves came amid more gloomy data on the global economy on Friday. The euro zone purchasing managers indexes for the manufacturing and services sectors signaled that activity contracted at a record pace in February. The region is a major trading partner of the U.K.

Mineral extractors were also sharply lower, with Rio Tinto (RTP) shares down 7.9%, Xstrata shares down 8.3% and Lonmin shares down 8.4%.

The losses came amid a downbeat report from Anglo American . Shares in the giant mineral extractor skidded 14.3% after it suspended dividend payments and share buybacks and said that a global headcount reduction of 19,000 is under way. Anglo's annual profit dropped 29%.

"As we begin 2009, the economic outlook remains weak, with limited visibility and we are continuing to experience volatility and downward pressure on commodity prices," said CEO Cynthia Carroll.

Prudential bucks lower trend

Insurer Prudential (PUK) advanced 9.3% after it disclosed a move to boost its capital.

It said that it has agreed to transfer the assets and liabilities of its agency distribution business and its agency force in Taiwan to China Life Insurance Company for a nominal sum. At the same time, it will invest 45 million pounds to purchase a 9.95% stake in China Life through a share placement.

On completion of the transfer to China Life, there will be a net increase in Prudential's capital surplus of approximately 800 million pounds.

Prudential said that at the end of 2008, its capital surplus was approximately 1.7 billion pounds.

Turning to smaller financial-sector company news, shares of subprime lender Cattles fell 54% after it warned that its pretax profit is expected to be "substantially lower" than current market expectations.

The group said it is delaying the release of its 2008 preliminary results while it reviews the adequacy of the impairment provisions it has taken and a new date for the results will be announced in due course.