Fear and oil price slide weigh on FTSE

FEARS of a slowdown in global economic growth hit miners and energy stocks yesterday, sending the Footsie into a near-100 point decline to hit a three-month low.

Energy stocks were also hammered by a steep drop in the price of oil, US crude off $4.34 at $91.07 and London Brent down $5.77 to $108.44 after the International Energy Agency said it would release 60 million barrels from government stockpiles in a bid to push down prices.

The FTSE 100 index ended down 98.61 points, or 1.7 per cent, at 5,674.38, its lowest close since 16 March when markets were plunging in the aftermath of the Japanese earthquake.

Miners and oil companies lopped a hefty 49 points off the index after data showed China's factory-sector growth was close to stalling in June.

Investors were also forced to stomach weak data on the US labour market, with jobless claims rising more than expected - a day after Federal Reserve chairman Ben Bernanke gave a more downbeat outlook on the economy, lowering the forecast for US growth.

Europe's debt crisis put pressure on banking stocks after European Central Bank president Jean-Claude Trichet warned about the effect the Greek crisis could have on banks.

David Jones, chief market strategist at IG Index, said: "It is difficult to know where to start as the bad news continued to bludgeon already punch-drunk investors. After Fed chairman Bernanke's speech on Wednesday fanned the flames of worry about medium-term prospects for the US economy, ECB president Trichet's comments about the risk to financial stability in the eurozone kept equities in a steep nose dive all day long."

The drop in the price of oil hit energy stocks, with Shell down 50.5p to 2,117.5p, BG dropping 41.5p to 1,289p and Edinburgh-based explorer Cairn Energy falling 13.9p to 383.1p.

A gas turbine servicing contract in Peru wasn't enough to stop Aberdeen-based energy services giant Wood Group joining in the slide. The stock was down 16p at 616p

In the mining sector, Antofagasta dropped 44p to 1,237p and BHP Billiton dipped 73.5p to 2,244p as investors steered clear of riskier assets.

Royal Bank of Scotland and Lloyds Banking Group also dropped after deputy prime minister Nick Clegg suggested the government should give the public shares in the two banks.

Any potential windfall for taxpayers through the proposed "people's banking system" looked far off as RBS and Lloyds were off 1.9p to 36.8p and 1.7p to 45.3p. This compared with the likely "floor price" of 51p and 74p respectively that would give free shares any value.

Broadcaster BSkyB was also on the risers' board after reports said Rupert Murdoch's News Corp had agreed a remedy with regulators to let it proceed with its bid for the company. BSkyB shares were 4.5p higher at 835p.I-Design, the Dundee-based cash machine software firm, was the star turn among Scots stocks, up 22 per cent at one stage after slashing interim losses. The stock closed up 11 per cent or 3p at 30p.

Edinburgh-based internet dating website operator Cupid was up 3.5p at 223.5p after snapping up a 75 per cent stake in a pair of German dating firms for 2.5m.