Property developers were among the sharpest decliners on Thursday as the FTSE took no support from the Bank of England’s unexpectedly aggressive rate cut.

Hammerson sank 9.4 per cent to 715p and British Land was down 6.3 per cent at 630p after Morgan Stanley forecast a further 42 per cent fall for the UK majors. The broker also questioned why British groups, unlike their US peers, are not required to disclose debt covenants.

“We think that it is an anomaly,” analyst Martin Allen told clients. “By non-disclosure of material price-sensitive information companies could be accused of creating a false market in their shares.”

He cut forecasts across the sector to reflect falling rents and distressed sellers. “We see increasing support for our view from rising concern over debt gearing covenants at the UK property groups, and we expect this concern to intensify over the next 12 months,” Mr Allen said.

The FTSE 100 closed down 5.7 per cent, off 258.32 points at 4,272.41. The benchmark had been about 4 per cent lower ahead of the Bank of England’s dramatic interest rate cut, by 1.5 percentage points to 3 per cent.

Vedanta Resources led the mining sector retreat after its interim profits showed the full effects of falling metals prices and cost pressures. The India-based group sank 20.5 per cent to 721½p.

Ferrochrome producers dived after Samancor, one of the leading producers of the metal, called for production cuts of up to 80 per cent to combat stockpiling in China and weak demand from stainless steel markets.

In response, Fairfax said ferrochrome prices are likely to collapse by at least half. “The impact on earnings will be dramatic,” it said.

Xstrata, the world’s largest ferrochrome producer, lost 14.1 per cent to £10.22. ENRC, the number three, slid 19.2 per cent to 289¾p.

Among the mid-caps, International Ferro Metals tumbled 38.5 per cent to 28p.

Old Mutual was one of just six blue-chip risers. The insurer jumped 3.2 per cent to 55.3p after its trading update did not contain the capital raising or dividend cut investors had feared.

Other financial stocks headed lower, with Man Group leading the way after reporting a slump in funds under management. The hedge fund manager sank 31.2 per cent to 270p, the sharpest fall since its flotation in 1994.

Royal Bank of Scotland fell 7.4 per cent to 63.9p, HBOS was down 9 per cent to 103½p and Barclays was at 183.7p, off 6.2 per cent.

“Things are getting worse, faster than we thought,” Credit Suisse said in a note, cutting bank earnings forecasts by about 40 per cent for the next two years.

“While the impairment news in the third quarter was poor, we think there’s a lot worse to come.”

The rate cut saved a few heavily-indebted companies from the sell-off, with Marks & Spencer leading the FTSE 100 risers on a gain of 3.3 per cent at 252¾p. Pali analyst Nick Bubb said the Bank’s move would reduce M&S’s interest bill by nearly £50m.

Elsewhere among retailers, Wm Morrison lost 4.5 per cent to 252¾p on a Cazenove downgrade of the supermarket to “in-line” from “outperform”.

“After a sustained period of significant forecast upgrades there is evidence that the momentum is beginning to dwindle,” it said.

Mitchells & Butlers lost 4.5 per cent to 180p after Trevor Hemmings, the gambling and leisure entrepreneur, sold 2m shares. Meanwhile, Irish tycoons JP McManus and John Magnier picked up more than 3m to raise their stake in the pubs group to 12 per cent.

IT group Dimension Data fell 13.9 per cent to 31p after Cisco said customer spending had weakened considerably in the past quarter as the downturn spread to emerging markets. About 40 per cent of DiData’s revenues come from installing Cisco ­products, with the IT group particularly reliant on Africa and Asia.

Chip designer Arm Holdings lost 5.9 per cent to 100p as it awaited results from Qualcomm, one of its key licencees. Peers, including Texas Instruments, have already warned on the fourth-quarter outlook, while Apple is reported to have cut iPhone production by 40 per cent.

“Arm’s royalties are set to decelerate at an alarming rate in the first half of 2009,” Dresdner Kleinwort said.