More financial woe as market plunges
The London market plunged close to the 6000 barrier today as concerns over the US economy sent shares tumbling on both sides of the Atlantic.
The FTSE 100 Index closed down more than 2%, falling 155.6 points to 6070.9 as further fears over America brought yesterday’s rally to an abrupt halt.
America’s Dow Jones Industrial Average in the US also fell more than 100 points in early trading, taking it well below 13000 again.
The stock falls came as oil prices surged close to 100 US dollars a barrel for the first time.
The cost of crude hit a record 99.29 US dollars a barrel in trading earlier today and US oil inventories data revealing an unexpected drop in supplies last week threatened to push it to the key psychological level of 100 US dollars a barrel.
But news that supplies at a closely watched oil terminal in the Midwest rose for the first time in weeks helped keep ease oil prices back.
Paul Webb, chief dealer at CMC Markets, said markets had been left unimpressed with lower than expected growth predictions for 2008 from the US Federal Reserve ahead of the Thanksgiving holiday in America.
He said: “The only real winners today have been the energy companies as oil prices edge back towards record highs.”
“The next big level for the FTSE is obviously 6,000 and a sustained breakthrough here really would open up the downside,” he added.
UK blue chips were also under pressure after the Bank of England’s latest meeting failed to offer encouragement over prospects for an early interest rate cut.
The negative sentiment around the financial sector saw Barclays fall 5%, while Halifax Bank of Scotland and Royal Bank of Scotland eased 4%.
Two of the casualties of the UK credit crisis – Northern Rock and buy-to-let specialist Paragon – recorded fresh double-digit percentage falls.
Northern Rock once again led the Footsie fallers – down 13% – as the troubled mortgage lender confirmed receipt of a rescue proposal “materially below” its market value last night.
And in the FTSE 250 Index, buy-to-let mortgage specialist Paragon dived another 36% after revealing funding difficulties yesterday. The stock had closed 39% lower last night.
Just four blue chips made positive gains amid today’s heavy falls, with Royal Dutch Shell among them, up 2% thanks to the surge in oil prices.
The Footsie is now only 70 points off falling through 6000 again.
The leading share index briefly fell below the barrier in August when the market dived as the crisis in credit markets began to unfold.
However, until recently it had been surging back towards 7000, only to be thrown off course by resurgent concerns over the credit crunch and fall out from the default crisis in America’s sub-prime mortgage market.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: “It’s very difficult to see any positives in the market at the moment.
“We’re absolutely right back to square one with the credit crunch and until we see the full extent of the losses as a result of the sub-prime and credit crisis the markets won’t be able to move up.”
