FTSE slides below 6,000 as economy worries mount

Published on Wednesday 16 January 2008 20:42

LONDON FTSE 100 CLOSE 5942.9 -82.7

GROWING fears of recession in America and a sharp slowdown at home pushed leading UK shares down another 1.4 per cent yesterday, with the FTSE100 index tumbling below the 6,000 level to its lowest point since mid-August.

The FTSE 100 ended 82.7 down at 5,942.9, this on top of Tuesday's 3 per cent plunge, making the opening weeks of 2008 one of the worst year-starts in the stock market in memory.

David Buik of spread betting company Cantor Index said he thought the index was "not a million miles from the bottom".

He added: "We breached the 6,000 mark much quicker than I thought we would. I believe the pain is going to be excruciating, but it'll be short-lived."

And Commerzbank economist Peter Dixon, added: "The markets are changing their view on the macro environment and what it means for earnings... My guess is we'll be down 5 per cent by the end of Q1. I don't think anyone at this stage would want to stick their neck out on equities."

Losses were briefly cut after the release of stronger-than-expected US industrial production figures for December.

But, as with so many rallies in recent months, it was soon snuffed out by deepening fears that there is worse to come in the credit crunch and that the wider economy is now set for a significant slowdown.

It was the turn of mining shares to feel the claws of the bear as weaker commodity prices tore into copper group Antofagasta, down 6.8 per cent and Kazakhmys, 5.8 per cent weaker. Rio Tinto, fighting a takeover approach from rival BHP Billiton, shed 6.6 per cent despite saying it produced record tonnages of iron ore, copper and other industrial minerals in 2007.

Oil slid more than $2 a barrel to below $90 for the first time since mid-December, amid signs that slowing US economic growth will erode fuel demand.

Royal Dutch Shell gave up 2.6 per cent and rival BP shed 1.6 per cent. JPMorgan cut its price target on the latter to 650p from 690p and rated the shares at "neutral". Scottish-based oil explorer Cairn Energy tumbled 102p to 2,538p.

Banks suffered further losses, though Royal Bank of Scotland escaped relatively lightly, slipping just 0.75p to a new multi-year low of 391.25p. HBoS dropped 10p to 630p, Britain's largest bank, HSBC, closed down 2.5 per cent at 753.5p and Lloyds TSB sank 2.9 per cent .

The few bright spots amid the gloom included British Airways. The shares rose 4.3 per cent to 289.5p after Goldman Sachs upgraded its rating on the stock to "buy" from "neutral". Another was British Land, topping the FTSE 100 gainers with a gain of 4.4 per cent after JPMorgan said it was time for investors to think contrarian and buy certain property stocks.

AstraZeneca climbed 3.2 per cent after Goldman Sachs upgraded the stock from "neutral" and added the shares to its conviction buy list.

DOW JONES 12,466.16 -34.95

WALL Street had a testing session yesterday after Intel announced disappointing earnings and JP Morgan offered some relief for investors concerned about the health of banks.

The JP Morgan report, as well as results from Wells Fargo, appeared to remind Wall Street that, while the fallout of souring loans was widespread, it wasn't necessarily evenly felt. And buyout news in the tech sector gave a boost to investor sentiment.

Patience has been tested by the predictions of some economists that a recession is at hand and by unsteadiness in the financial sector, where many banks are struggling to shore up damaged balance sheets.

The Dow Jones Industrial Average fell 34.95, or 0.28 per cent, to 12,466.16. The Standard & Poor's 500 index declined 7.75, or 0.56 per cent, to 1,373.20, and the Nasdaq composite index fell 23.00, or 0.95 per cent, to 2,394.59.