LONDON (AFP) - London shares slumped on Thursday in the wake of heavy falls in Asia, pulled down by sharp losses for the banks as the global economic outlook turns darker still.

London's FTSE 100 index of leading shares was down 0.88 percent at 5,318.90 points in early afternoon trading.

Traders said concerns over banks, mired in losses due to the collapse of the US property loan market, were stoked further after ailing US investment bankLehman Brothers failed to reassure investors over its future on Wednesday.

"Today's losses are basically coming from disappointment that Lehman Brothers failed to give the market a positive surprise," Daiwa Securities SMBC market analyst Yumi Nishimura told Dow Jones Newswires.

Barclays dived 7.45 percent to 338.50 pence in London and peers HBOS and HSBC shed 4.50 and 1.72 percent respectively.

Oil prices tumbled to six-month low points below 98 dollars a barrel on Thursday as the dollar rallied and demand for energy decreased around the world due to the economic slowdown.

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