FTSE falls 2.4 pct on Bernanke comments

By Michael Taylor

LONDON (Reuters) - The FTSE 100 fell over 2 percent to its lowest close since October 2005 on Tuesday, with the broader market hit by worries over economic growth while a slide in crude weighed on heavyweight oils.

The FTSE 100 plummeted 128.5 points, or 2.4 percent at 5,171.9, and is now down almost 20 percent for the year to date.

Delivering testimony to lawmakers, U.S. Federal Reserve Chairman Bernanke said many financial markets and institutions remain under considerable stress, adding that a weakening housing market, tighter credit and rising oil prices threaten the U.S. economy.

Banks were a big losing sector, despite moves by the United States to stabilise two leading mortgage providers on Sunday.

Barclays, Royal Bank of Scotland, HSBC, HBOS, Lloyds TSB and Standard Chartered tumbled between 3.2 and 7.1 percent.

"The problems they (Fannie Mae and Freddie Mac) face still highlight issues which are fundamental to the market," said Henk Potts, equity strategist at Barclays Stockbrokers.

"The reality is everyday investors are looking at... runaway inflation, falling house prices, weak business and consumer confidence surveys and that continues to sap away investors' confidence."

Soaring food and fuel prices pushed the inflation rate to nearly double the central bank's 2 percent target in June, boosting talk of interest rate hikes ahead. Kazakhmys slipped 5.4 percent. The copper producer, which said on Monday it was holding merger talks with an unnamed firm, denied speculation the deal might involve a reverse takeover.