Shares hit by US data and China fears

London's Footsie plunged more than 2 per cent yesterday as recovery fears sent stock markets reeling worldwide.

Disappointing economic data in the US capped a poor session for investor sentiment, which took a battering overnight amid signs of slowing growth in China.

The FTSE 100 closed 111.12 points down at 4,805.75, with hefty falls on Wall Street's Dow Jones Industrial Average in early trading.

The pound strengthened against the dollar as weak US jobs, housing and manufacturing data slammed the greenback, at $1.51, although sterling fell to €1.21 as European funding concerns eased.

Yesterday's sharp slide for the Footsie marked an ominous start to third quarter trading after losing more than 13 per cent in the previous three months.

As well as the Chinese and US concerns, a move by ratings agency Moody's to put Spain on review of a possible downgrade was behind the latest sell-off. Also, the purchasing managers' index produced by the Chartered Institute of Purchase and Supply, a closely watched gauge of UK manufacturing activity, gave cause for concern that the bounce back from recession on these shores was faltering due to a eurozone blow to exports.

Michael Hewson, analyst at CMC Markets, said: "With the US employment report today expected to show a fall due to the rolling off of the temporary census jobs, the question vexing markets now is how much the figures will fall by."

Financial and commodity stocks were suffering in London due to the growth concerns, with Barclays and Royal Bank of Scotland down 15.2p to 255.4p and 2p to 39.5p respectively.

Shell was 77p lower at 1,554p after it said it would lose 32,000 barrels of oil a day in the Gulf of Mexico due to the shutdown prompted by Hurricane Alex.Rival BP was one of only two blue chip stocks to gain ground, adding 9.1p to close at 328p, a gain of almost 3 per cent.

Edinburgh-based oil and gas explorer Cairn Energy fell 3.3 per cent or 13.6p to close at 401.3p despite announcing that it had commenced drilling exploratory wells off the coast of Greenland.

Shares in Wood Group, the Aberdeen-based oil services outfit, were down 2.3p at 310.9p after its trading update for the six months to 30 June said its performance had been "in line with expectations".

In the FTSE 250 Index, Tate & Lyle lifted 4.7p to 454.4p after the industrial giant took the historic decision to sell its European sugar refining business, including its Golden Syrup factory in London, to American Sugar Refining for 211 million.

Department store chain Debenhams was also higher, up 2.1p to 55.1p, despite reporting a 0.4 per cent drop in like-for-like sales in the 42 weeks to 19 June.

Analysts said stronger margins and quicker than expected progress on a debt refinancing deal were behind the share price improvement.

Pubs and brewing firm Greene King - which owns the Belhaven brewery near Dunbar - meanwhile was 2.7p better at 395p after strong results and announcing plans to expand its Hungry Horse managed pubs business by more than 200 outlets.