The drastic move stunned stock markets and wiped more than £62bn from the FTSE 100 Index as it brought home the growing prospect of a deep and prolonged recession.

Downbeat retail sales and employment figures from the United States added to the gloom, leaving the top-flight index 258.32 points lower at 4272.41 by the close.

Businesses cheered the Bank's decision, but the market reaction suggested that attentions had now returned to the state of the UK economy.

CMC Markets trader Jimmy Yates said: "The fact the BoE jumped in with a huge 150 basis point cut certainly gave the market a wake-up call."

High street giant Marks & Spencer was one of a handful of blue-chip stocks in positive territory amid hopes that the cut could tempt consumers back into the shops.

M&S was the Footsie's leading riser, ahead by 8p to 2523/4p, or three per cent. In the FTSE 250, rival Debenhams – which has significant debt – initially soared 13 per cent but gave back the gains to stand 13/4p lower at 35p.

Elsewhere in the top-flight trading screens turned mostly red. Hedge fund Man Group was the biggest casualty after it revealed the global financial turmoil had knocked nearly a quarter off interim profits and left assets under management lower than forecast. Shares plunged 31 per cent or 1221/4p to 270p.

Investors also dumped commodities stocks on the latest recession concerns, with mining firms littering the fallers' board. Eurasian Natural Resources was the biggest casualty, down by 691/4p at 2893/4p.

Crude oil shed $4 to $61 a barrel, leaving BP 30p worse off at 493p and Royal Dutch Shell 125p lower at 1647p.

Banks remained under pressure despite the rate boost, with a note from Credit Suisse still weighing heavy on sentiment after it said trading for UK banks was deteriorating at a faster-than-expected pace.

It lowered its target price for Lloyds Bank Group, which includes HBoS, and warned Royal Bank of Scotland could make a loss in 2009 as well as this year.

Lloyds TSB slumped 10 per cent or 21.15p to 187.6p and HBoS fell 101/4p to 1031/2p, while Royal Bank of Scotland was down 5p at 64p, a fall of eight per cent.

In the FTSE 250, former blue-chip Tate & Lyle rose four per cent after it posted stronger-than-expected first-half profits and said it was well-placed to cope with a global slowdown. Shares added 12p to 3813/4p.

A housebuilding bounce-back in the second tier on hopes of some respite for falling property prices was led by York-based Persimmon, up 14p to 3363/4p, and Barratt Developments, which gained 11/2p to 85p.

The biggest Footsie risers were M&S, up 8p to 2523/4p, Old Mutual ahead 1.7p at 55.3p, International Power up 71/4p at 2631/2p and Cobham ahead by 3.9p to 192.9p.

The biggest fallers were Man Group down 1221/4p at 270p, ENR off 691/4p at 2893/4p and Invensys down 291/2p at 138.1p.