Credit fears force FTSE down

The FTSE 100 Index fell by 2.5% today as fears over the crunch in credit markets continued to hound investors worldwide.

Financial stocks dominated the fallers board in London, as the Footsie dived 166.4 points to 6104.8 by mid-morning, leaving it at the lowest level since March and below the market’s starting point for the year.

Global markets slumped overnight with the Dow Jones Industrial Average losing almost 400 points after central banks, including the European Central Bank, pumped emergency cash into money markets after French bank BNP Paribas froze three funds.

Banks were one of the biggest losers in London with Barclays falling 5%, or 34.5p to 647p, Asian-facing bank Standard Chartered off 86p to 1574p and Royal Bank of Scotland 23p lower at 561.5p.

Fund manager Man Group topped the Footsie fallers board after it suspended the listing of two hedge funds on the US stock market yesterday. The group fell 6%, or 29p to 498p.

The crisis overshadowed half-year results from financial services group Old Mutual, which was off 5.9p to 155.5p after posting a 12% drop in operating profits.

The strength of sterling against the rand and US dollar caused the decline, with chief executive Jim Sutcliffe insisting the company’s growth prospects would not be derailed by the current market volatility.

Only a handful of stocks were in positive territory, with broadcaster ITV up by a penny at 108.5p as sentiment remained strong after interim results on Wednesday.

The FTSE 250 Index was down by more than 250 points, led by software retailer Game Group after the Office of Fair Trading’s decision to refer its Gamestation acquisition to the Competition Commission.

The uncertainty caused by the referral left shares 27.5p at 143.5p, a drop of more than 16%.