Hewlett-Packard's multi-billion pound approach for Cambridge-based software company Autonomy (AU.L) could not stop the FTSE 100 from continuing its downward spiral.

The blue chip index dropped below the 5,000 mark dropping by more than 100 points in early trading, as negative sentiment continued to affect markets.

The approach for Autonomy sent share prices soaring, rising by 75.2 per cent to 2,504p (at 0906).

Under terms of the offer, Autonomy shareholders will be offered 2,550p per share, valuing the company at £7.1 billion.

The American company believes the acquisition will expand its current offering.

Mike Lynch, chief executive and founder of Autonomy, said, 'This is a momentous day in Autonomy's history.

'From our foundation in 1996, we have been driven by one shared vision: to fundamentally change the IT industry by revolutionising the way people interact with information.

'HP shares this vision and provides Autonomy with the platform to bring our world-leading technology and innovation to a truly global stage, making the shift to a future age of the information economy a reality.'

Léo Apotheker, president and chief executive of Hewlett-Packard, added, 'Autonomy is a highly profitable and globally respected software  company, with a well regarded management team and talented, dedicated employees.

'We look forward to partnering with a company who shares our commitment to solving customer problems by creating smart, cutting-edge products and solutions.'

Microchip manufacturer Arm Holdings (ARM.L) also saw its share price rise, up 2.3 per cent to 489.9p.

The biggest faller (at 1106) was Lloyds Banking Group (LLOY.L) dropping by 7.4 per cent to 27.6p. Indeed, the banking sector was worst hit in morning trading, with Royal Bank of Scotland Group (RBS.L) and Barclays also suffering.

RBS saw its share price drop by 5.5 per cent to 20.75p, while Barclays fell 5.4 per cent to 145.75p

Other fallers included energy services provider Wood Group (WG.L), down 7.1 per cent to 488.9p, and engineer GKN (GKN.L) falling 5.4 per cent to 178.2p.

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