Footsie drops to year low

More than £24bn was wiped off the value of the UK’s biggest companies today during the worst session for the FTSE 100 Index in more than a year.

Inflationary fears in the US triggered the mass sell-off as the Footsie dropped 96.1 points to 5167.8 on the anniversary of the 1987 Black Monday stock market crash in London.

The Footsie lost 1.8% by the close of trading to record its worst performance since May 10 last year when it contracted by 2.3% or 103.2 points.

Investors were also dismayed by the news that lower borrowing costs were not in the current thinking of the Bank of England after minutes of its Monetary Policy Committee revealed members voted unanimously to keep interest rates at 4.5% this month.

Rising US producer prices yesterday had sparked fears that the US central bank will raise interest rates to contain inflation.

New York’s Dow Jones Industrial Average opened lower for the second consecutive session today, while stocks suffered across Asia and Europe.

This contributed to the Footsie moving further away from a four-year high of more than 5500 reached at the start of the month.

Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown, said: “We are now off 300 points over a couple of weeks. I do question whether that has been overdone.”

However, today’s losses were nowhere near as bad as October 19 1987, when the top flight lost 500 points in the first hour of trading and ended the session 250 points in the red.

The market was dragged down today by a string of mining stocks amid worries about commodity prices.

Oil firms also suffered a heavy hit as the cost of a barrel of crude hovered around the 63 US dollars mark in New York, well off the peak above the 70 US dollars mark seen in August.

BP and Royal Dutch Shell both lost 2% of their value, weighing heavily since they make up around a fifth of the top flight.

International Power was also hit hard after confirming it had made an approach to buy a stake in the Drax power station, although this was later rejected by the target.

Only a handful of stocks were in the black today, including drugs giant AstraZeneca and retailer Marks & Spencer.