LONDON (AFP) - The leading stock exchange nosedived by more than 5 percent on Monday as the nationalisation of Bradford & Bingley rattled investor hopes that the financial crisis can be contained by a massive US bailout plan.

Dealers said the recent spate of US and European bank failures and rescues -- Wachovia, Fortis, Bradford & Bingley, Hypo Real Estate -- rocked the markets amid growing doubts about passage of the $700 billion rescue package

In London, the FTSE index of leading shares closed down 5.30 percent to 4,818.77 points after the Treasury said it would nationalise B&B's mortgage and loans book.

The struggling bank's savings business -- its best asset with 20 billion of savings and 2.7 million customers -- will be sold to Spanish peer Santander for 612 million.

Belgian-Dutch banking and insurance group Fortis meanwhile completed a multinational state rescue while Citigroup agreed to take over the banking operations of Wachovia in a deal that gives the US government a stake in one of the nation's largest banks -- highlighting the ongoing woes of the financial sector.

"There's an agreement in place for the $700 billion bailout but in this market, no one is taking any chances and we must wait until the vote to confirm it has passed," said City Index market strategist Joshua Raymond.

Morrisons was the only blue-chip issue to stay in the black as the low-cost supermarket saw its share price creep up by 1.25 pence -- or 0.51 percent -- to close at 247.25.

The UK's fourth-largest supermarket group said on September 11 that it has seen a 7.6% increase in sales as hard-pressed shoppers look to slash their food bills.

Financials were the biggest casualties as nervous investors looked to offload their shares.

ICAP topped the FTSE 100 loserboard as the the world's largest inter-dealer broker saw its shares tumble by 89.25 pence -- or 23.58 percent -- to close at 289.25.

MAN Group was also under heavy-selling pressure as its share price shed 68.25 pence -- or 18.26 percent -- to close at 305.50.

Royal Bank of Scotland (RBS) was the most traded issue with investors exchanging 213 million shares in the UK's second largest bank.

Vodafone was the second most traded blue-chip as traders swapped 179 million shares in the telecommunications giant.

Sterling fell against both the euro and dollar after the Treasury announced it had nationalised Bradford & Bingley.

The pound fell to 1.8038 against the dollar at 16.58pm, down from 1.8277 at the close of trade on Friday. Against the euro, the pound slipped to 1.2548, down from 1.2607.

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