Markets: Quake is just latest weight on FTSE

The Footsie sank lower yesterday as news of the Japanese earthquake added to sentiment already depressed by Thursday's sell-off, fuelling fears of a wider correction.

With the escalating violence in Libya and Europe's sovereign debt crisis making investors increasingly risk-averse, the FTSE 100 Index finished the session 16.62 points or 0.3 per cent lower at 5828.67 - the lowest level since December.

David Jones, chief market strategist at IG Index, said the market was "on a knife edge."

"Already fragile sentiment was undermined further as news came in of the Japanese earthquake," he said. "Although there was some recovery towards the end of the session, nervous investors were clearly in no mood for bargain hunting.

"Some people were already concerned that some sort of correction was due after the 20 per cent-plus gains seen since last July. If Monday sees further drops for UK blue-chips, it could well suggest we are heading for a much deeper correction than we have been used to over the past 12 months."

The only relief for traders yesterday came from Wall Street as the Dow Jones Industrial Average benefited from a stronger-than-expected report on retail sales, rising in early trading.

The prospect of a short-term drop in demand for crude from Japan sent the price of oil below $100 for the first time this month.

The quake led to a knee jerk drop in the yen but the Japanese currency steadied thanks to its status as a safe haven for international traders. Meanwhile, the pound was down against the dollar and euro.

One of the biggest falls in London came from FTSE 250 Index re-insurer Catlin Group, which dropped 4.5 per cent, or 16.3p, to 349.8p. Sentiment was dented across the insurance sector, with RSA Insurance down 3.5p to 133p, Prudential off 14p to 721p and Legal & General 2.3p lower at 115.2p.

Shares in JD Sports Fashion jumped 5 per cent after it said it was no longer interested in a takeover of ailing rival JJB Sports. JD, which rose 47p to 930p, said it had not been possible to gain access to key information from JJB. Shares in JJB fell 1.5p to 13.5p as the move heaped pressure on the retailer to complete its ongoing restructuring.

JD Wetherspoon shares were slightly higher despite results showing an 11 per cent fall in half-year profits to 32.2 million, close to market expectations. The pub group said it remained cautious about costs but with sales still rising Wetherspoon shares remained near to their opening mark, up 2.8p to 433.7p.

Luxury goods firm Mulberry continued to soar, up 189.5p to 1,409.5p, after its second upgrade to profits and sales expectations this year.The stock has enjoyed a spectacular run in recent months having been 200p a year ago.

Among the Scottish companies, FirstGroup slumped 5 per cent after the transport firm said strong revenues growth at its UK rail business had been offset by continued tough trading for its American school bus operation. Shares were 12.8p lower at 347.4p.

Royal Bank of Scotland dipped 0.15p to 42.85p as it announced it had sold the Brighton Hilton Hotel to Topland Group for 39.25m.