Over €35bn wiped off FTSE

More than £35bn (€36.4bn) was wiped from the value of London’s top shares after a series of interest rate rises worldwide put the skids under markets.

A surprise move on borrowing costs in South Korea sparked a sell-off in Japan before the European Central Bank and three other countries followed suit.

With investors spooked by the threat to growth caused by higher borrowing costs, the FTSE 100 Index closed 143.4 points lower at 5562.9, with markets in France and Germany also down by 2% or more.

The declines followed the biggest loss in a year in Tokyo where the Nikkei shed more than 450 points while Hong Kong’s Hang Seng was 350 points lower.

The volatility around the world was shared by commodities with sharp falls for the price of copper and gold sending mining stocks in London lower.

Miners suffer in times of high interest rates amid fears that demand will be curbed. Rio Tinto fell 7% or 194p to 2580p, while Anglo American was down 135p at 1845p and BHP Billiton dipped 65.5p to 935.5p.

Energy stocks were also acting as a drag after the killing of Abu Musab al-Zarqawi, al-Qaida’s leader in Iraq, caused the price of oil to fall below $70 a barrel.

Royal Dutch Shell was off 65p to 1745p and Cairn Energy was down 117p to 1925p, while BP was 21p lower at 603p as it was also hit by news that it was facing a criminal investigation in the United States over a massive oil leak in Alaska in March.

Airports operator BAA was also heavily traded during a dramatic session for the blue-chip stock, which earlier this week backed a £10.3bn (€15bn) takeover by a consortium led by Spanish firm Ferrovial.

Hopes of a rival bid from Goldman Sachs were raised early on, but were quickly dashed when BAA said it was no longer in discussions with the US bank. Shares were 7p lower at 9278p as investors settled for Ferrovial’s agreed offer.

Only six blue-chip stocks were in positive territory, one of which was Cable & Wireless after it announced plans to focus its Bulldog division on wholesale services for major broadband providers.

Investors liked the strategy and pushed the beleaguered telecoms company half a penny higher to 106.5p.

The news that Cable & Wireless was dropping out of the broadband market was also seen as positive for BSkyB, which is making its own entry into the sector. Shares were up 9p at 55p, a gain of more than 1.5%.

Centrica was another riser as analysts speculated that cash circulating in the City following the BAA deal could fund a move for the British Gas owner. Shares were 4p higher at 279p.

Morrisons held firm after last night’s appointment of a new chief executive to take on the duties of veteran chairman Ken Morrison. Shares were half a penny lower at 195.5p after a strong rise yesterday.

The biggest Footsie risers were BSkyB up 9p at 559p, Centrica ahead 4p at 279p, Tesco up 3.5p at 327.5p and Rentokil Initial ahead 1.25p at 142.25p.

The biggest fallers were Rio Tinto down 194p at 2580p, Anglo American off 135p at 1845p, BHP Billiton down 65.5p at 935.5p and Xstrata off 121p at 1815p.