Recession fears push FTSE down 1%

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Britain’s top share index shed another 1 per cent yesterday as negative economic forecasts for the UK and eurozone encouraged traders to bank gains made earlier in the quarter.

The FTSE 100 was down nearly 67 points at 5,742.03, following a similar drop on Wednesday.

Michael Hewson, senior analyst at CMC Markets, said: “The softer tone in equity markets in recent days has carried on where it left off, as economic data continues to disappoint, prompting traders to pull money off the table at the end of a significantly positive quarter.”

The OECD said it expected the UK to shrink this quarter despite recent upbeat surveys. It also forecast recession in France and Italy.

Banks were among the fallers as bond yields across Europe started to rise again, with Spanish ten-year yields in particular pushing back above 5.4 per cent amid images of anti-austerity riots. Barclays fell 4.6 per cent at 234.2p and Royal Bank of Scotland shed 2.7 per cent to 27.8p.

Lloyds Banking Group was off 1p at 33.4p after the boss of the Co-op said there had been questions over its bid for 632 of the lender’s branches. Chief executive Peter Marks insisted the Co-op knew “how to run a bank” despite speculation that the Financial Services Authority was concerned by a lack of expertise on its board.

Clothing retailers suffered after Swedish fashion giant H&M warned that increased costs hit its gross margins. Marks & Spencer dropped 11p to 373.2p, while Next slipped 29p to 2,980p.

Outside the top flight, Aberdeen-based transport operator FirstGroup fell 14 per cent after it warned margins at its UK bus business would be squeezed next year, prompting some analysts to slash their forecasts. Shares were down 41.7p at 247.4p.

New York: The S&P 500 and Nasdaq shook off earlier losses to end slightly lower last night, while the Dow eked out gains as investors took advantage of a sell-off to buy recently outperforming blue chips.

The Dow Jones industrial average gained 19.45 points, or 0.15 per cent, to end at 13,145.82 while the broader S&P 500 Index dipped 2.27 points, or 0.16 per cent, to finish at 1,403.27. The Nasdaq Composite Index fell 9.60 points, or 0.31 per cent, to close at 3,095.36.