US fears spark downturn in FTSE
Fresh fears over the US economy sent London’s leading share index spiralling more than 2.5% into the red today.
Worse-than-expected US service sector figures spooked nervous investors on both sides of the Atlantic.
The FTSE 100 Index dropped 158.2 points to close at 5868, wiping around £38 billion off the value of UK blue chips.
America’s Dow Jones Industrial Average saw equally dramatic falls, off more than 200 points, after figures revealed that the services sector contracted for the first time in almost five years.
In London, housebuilders and heavily-weighted banks were among those which suffered the most.
The falls also wiped out most of the earlier gains seen by oil major BP after its fourth-quarter results.
BP had spent most of the day at the top of the risers board as investors hoped the group may have seen the worst of its problems after a difficult 2007.
Shares were up more than 2% at one stage, despite a 22% fall in annual profits, thanks to its decision to hike dividends by 25%.
But a sell-off later in the session saw shares close up just 1p at 543p.
The wider market falls compounded an already poor trading day for housebuilders.
Taylor Wimpey shed 8%, or 16.35p to 184.0p, followed closely behind by Persimmon down 58p at 732p – a 7% decline.
Broker downgrades saw banks falling as the sector’s reporting season looms.
Royal Bank of Scotland fell more than 5%, or 22.5p, to 383p, Barclays slipped 20.5p to 460.75p, and Halifax Bank of Scotland was off 22.5p at 687.5p.
Downgrades also hit property firms, as HSBC gave a downbeat outlook for Hammerson and British Land, among others.
Hammerson was the sector’s biggest faller off 78p at 1067p, followed by Liberty International down 69p at 1009p.
In a poor session for the retail sector, fashion chain Next fell 109p to 1413p after a Panmure Gordon downgrade and Argos owner Home Retail Group was off 19p to 274p. B&Q owner Kingfisher also suffered, shedding 8%, or 12p, to 141.6p.
In the FTSE 250, Mike Ashley’s Sports Direct International gained 6.5p to 112.25p – or 6% – after the Sports World entrepreneur signed an agreement with a major Chinese retailer.
Troubled bank Northern Rock was also on the rise, up 2%, or 2p to 90p as reports suggested investment group Olivant may be tempted back to the bidding process if the Government alters its terms.
But second tier microchip designer ARM Holdings plummeted 20% after it revealed an 18% slump in net profits during 2007 to £36.8 million, down from £45.2 million the year before. Shares closed down 23.75p at 94.25p.
The only Footsie risers were Shire up 8p at 952p, Scottish & Newcastle ahead 1.5p at 785.5p and BP up 1p at 543p.
The biggest Footsie fallers were Taylor Wimpey down 16.35p at 184.9p, Kingfisher off 12p at 141.6p, Persimmon down 58p at 732p and Next down 109p at 1413p.
