THE London market slumped in late trade yesterday as both the Bank of England and the European Central Bank kept interest rates on hold and increased economic fears weighed on banks.
The benchmark FTSE 100 index closed 137.6 points, or 2.5 per cen
t, lower at 5,362.1 – marking its biggest daily fall since 11 July – after earlier touching a session high of 5,541.7. It was the second day that the Footsie had fallen more than 2 per cent.
On a busy day for economic data, comments from ECB president Jean-Claude Trichet that eurozone economic data pointed to a weakening in growth at mid-year, with inflation remaining high, weighed heavily.
Those remarks and some downbeat data in the US saw banks and dollar-facing firms take the main punishment in London.
UK banks accounted for over 40 negative index points, with Barclays, HBOS, Lloyds TSB and HSBC down between 3.3 and 6.8 per cent. Royal Bank of Scotland fell by 3.9 per cent, or 9.25p, to 227.75p, while HBOS was the worst performer in the top flight, suffering a 6.8 per cent slide to 282.5p.
Before the ECB comments, the Bank of England kept interest rates unchanged at 5 per cent for a fifth month running, but expectations are rising that recession worries could prompt a cut before the end of the year.
Felix Riley, chief executive of ChoiceOdds, said: "On the one hand this is a measured reaction to the twin problems of inflation and a contracting economy – stagnation by any other name.
"On the other hand, it could well be an admission of the lack of ideas present in the great and the not-so-good ... the markets and industry would not be averse to an interest rate cut – or two."
Retailer Marks & Spencer was another hefty faller, down more than 5 per cent, or 14p, to 247p.
US-facing building supplies firm Wolseley lost 22.75p to 450.25p, with another big operator across the Atlantic, Rolls-Royce, down 18.75p to 381.5p.
Miners also suffered as commodity prices fell further. Ferrexpo was down 13.25p to 198p, with Anglo American also a main casualty, off 129p at 2,430p.
Transport-related stocks lost some of the gains seen in recent days after oil prices had fallen below $110 a barrel. British Airways was 12.5p cheaper at 250p, while cruise ship firm Carnival fell 60p to 1,957p.
Unilever was the biggest top-flight riser, up 91p to 1,581p, after the appointment of Nestlé executive Paul Polman as successor to current chief executive Patrick Cescau. The former Procter & Gamble executive is expected to lead a more aggressive pursuit of sales growth.
Whitbread was also higher after it said the economic downturn continued to help its Premier Inn budget hotel brand and the value-for-money offerings served at its restaurant chains, such as Beefeater. With like-for-like sales up 7 per cent, shares rose 7p to 1,127p.
The full article contains 525 words and appears in The Scotsman newspaper.
