FTSE falls to eight-week low

The London market plunged to its lowest close for eight weeks today as gloomy sentiment around the world hit home.

The London market plunged to its lowest close for eight weeks today as gloomy sentiment around the world hit home.

About £38bn was wiped off the value of blue-chip shares, rocked by poor economic data, ongoing concerns about Iraq and weak corporate updates.

A tough start on Wall Street compounded the gloom and by London’s close the Dow Jones Industrial Average was off 140 points.

It meant the FTSE 100 Index ended a hefty 159.7 points behind at 3865.4, its lowest finish since July 24.

Alex Scott, equities analyst at Seven Investment Management, said: “It’s all pretty gloomy really and it’s not easy to see the brighter signs in the economic outlook.

“Companies are still telling investors they are finding life quite difficult and are not able to predict revenues and profits with any certainty, meaning its becoming difficult for investors to value companies.”

Some of the harshest corporate announcements came from the US.

Hitting trading were bleak updates from computer firm Oracle and fast food giant McDonald’s and a profits warning from investment bank JP Morgan.

Like many in the sector, JP Morgan has been hit by bad loans and UK banks were some of the session’s heaviest fallers.

Barclays shed 36p at 403p, Lloyds TSB was down 38p at 483p, Bradford & Bingley fell 22p at 296p and Royal Bank of Scotland was 92p weaker at £13.60.

But it was not just the banks that were under pressure, and other financial stocks were also heading south.

Fund manager Schroders slid 47p at 475p while among the insurers, Prudential tumbled 36p to 360p and Aviva lost 29p at 346p.

Insurers have had a rough ride recently as investors fret about liquidity during times of stock market volatility.

Other heavyweight companies falling back included oil giant BP, the market’s biggest stock, and drugs specialist GlaxoSmithKline.

BP was caught up in the wider gloom despite slightly higher oil prices and lost 23p at 434p while GSK shed 42p at £11.92.

Defensive stocks were not the only ones under pressure, however.

Cable & Wireless hit the hi-tech sector with a warning of a revenue shortfall in its key global division and its shares lost 5{p at 132p.

Mobile phone giant Vodafone fell 4p at 86p, rival mmO2 shed 1p at 42p and former parent BT eased 3p at 189p.

The depressed mood did little for B&Q-to-Comet group Kingfisher, which posted a forecast-beating set of interim figures.

But the shares fell 12p to 203p as investors focused on comments that trading conditions in the short-term were likely to be tough.

It was a slightly better showing among smaller stocks, however, and discount clothing retailer Peacock perked up 2p at 71p after sticking to profits targets.

Media group Chrysalis also rose, up 12p to 171p, after signalling a strong jump in revenues from its radio business.

Back in the FTSE 100, the heaviest fallers were Prudential, off 36p at 360p, Schroders, off 47p at 475p, Reuters, off 22p at 225p and Granada, off 6p at 74p.

The only riser was BAA, up 1p at 539p.

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