Holiday over as Footsie falls

Published on Tuesday 1 September 2009 20:58

LONDON FTSE 100 CLOSE 4,819.7 -89.2

LONDON'S leading share index plummeted 1.8 per cent into the red yesterday as investors returning from their summer holidays sought to seal in recent profits amid mixed global economic signs.

Stocks that had risen sharply during the July and August rallies retreated, with declines among financials and miners combining to drag the FTSE 100 down 89 points to 4,820.

Angus Campbell, head of sales at Capital Spreads, said: "The overriding concern of this recent rally has been its lack of volume and today may have marked the first round of sustained profit-taking.

"In the back of many investors' minds is the concern that September is usually a poor month for equities and we haven't got the month off to the best of starts."

Encouraging news on the manufacturing and housing sectors in the United States failed to prevent a steep slide in early trading on Wall Street too.

Fears that the recent gains may be overdone saw nervous US investors head for the exit.

The London market had already spent much of the day in the red after data showed signs of a stalling in the recovery of the UK manufacturing sector.

Economic news also revealed that homeowners repaid 418 million more than was advanced in July as the credit crunch continued to restrict new lending by banks and building societies.

Additional figures from the Bank showed a record 8.4 billion fall in business lending over the month.

The mood earlier in the session was helped by a modest recovery for Asian markets in time for London's return following the holiday weekend.

This was undone by the Chartered Institute of Purchasing & Supply's measure of the manufacturing sector, which posted 49.7 in August, below the no-change mark of 50 and well down on the City's forecast for a figure of near to 52.

The latest economic wobble caused miners to fall, led by Eurasian Natural Resources off 60p at 805p.

Among banks, Lloyds Banking Group was the worst off, down 5.33p at 106.01p, while Royal Bank of Scotland fell by 3.7 per cent, or 2.15p, to 55.5p.

RSA Insurance was 5 per cent lower following reports that it may turn to investors for a 1bn fundraising. Shares retreated 6.2p to 124.4p.

Defensive stocks were popular amid the economic uncertainty, with cleaning products firm Reckitt Benckiser ahead 27p at 2,880p and British American Tobacco up 14p at 1,888p.

AstraZeneca was also ahead – up 16p to 2,856p – after the pharmaceuticals giant reported at the weekend that trials of a blood-thinning pill had produced a 16 per cent drop in heart attack and stroke deaths among patients.