Footsie in freefall as index drops below 5400 mark

The Footsie index of 100 leading shares has plunged through the 5400 barrier, plagued by negative sentiment surrounding the state of the US economy.

After just an hour of trading, the index is in freefall, dropping by 141.2 points to stand at 5398.8.

Economists say the market is registering its disappointment with the size of the cut in US interest rates on Tuesday night. But the City was also hit by yet another profits warning, this time from London-based engineering group Invensys.

It says the slowdown in the US economy has hit demand for its automation and control systems, and says profits over the second half of its financial year will be lower than the first half. The group has announced plans to cut 2,000 jobs worldwide, in addition to 3,000 job losses announced in November.

Shares in Invensys have fallen by 13% or 17p to 112p after the announcement, placing it firmly on top of the Footsie fallers board.

Technology and telecoms stocks are also continuing to suffer in the sell-off, with telecoms group Energis down a further 7% or 20½p at 259; and BT off 28p at 466p.

Software groups Misys and Sage are also down, shedding 24p and 14¼p to stand at 503p and 243p respectively.

Of the risers, Powergen has seen its shares spark by 4% after saying it is still in takeover talks with a number of potential bidders - following its January announcement that it had received interest from German utility E.On.

Outside the Footsie 100, supermarket chain Morrisons is up 7p to 190p after posting full-year profits of £219m, some way ahead of City expectations.

Meanwhile, share prices in Ireland are slumping.