FTSE suffers afternoon slump

The London market slumped in afternoon trading today after a poor opening on Wall Street knocked investor sentiment.

A steeper-than-expected fall in inflation to below the Bank of England’s 2% target had boosted stocks earlier in the session, with investors hopeful for a prolonged freeze on interest rates.

But the FTSE 100 Index reversed the gains to close down 75.5 points at 6143.5 as fears over the collapse of the sub-prime mortgage market returned to spook investors in the US.

The Dow Jones Industrial Average opened down around 100 points after disappointing earnings results from WalMart and the US’s largest DIY chain Home Depot, which it blamed on the slowdown in the housing market.

Property groups in the UK saw some of the biggest falls with real estate investment trust Hammerson sliding 32p to 1214p and Segro off 14p to 524p, while house builders Persimmon and Barratt Developments both slipped by almost 2%, or 21p to 1211p and 16p to 920p respectively.

Financial stocks also suffered with fund manager Man group sliding 17.5p to 494.5p, while Barclays lost 21.5p to 637p and Alliance & Leicester dropped 26p to 1056p.

Dairy Milk maker Cadbury Schweppes fell more than 3% or 19.5p at 556p after a downgrade from Credit Suisse due to the prospects of a lower selling price for its US drinks business because of credit market volatility.

Meanwhile supermarket group Morrisons, was down almost 3%, or 7.5p, to 258.5p after halting cold meat sales at two stores in Scotland following a health scare.

Brewing group Scottish & Newcastle was one of the session’s strongest risers on speculation that Danish brewer Carlsberg was investing in the stock as a prelude to a bid for the group. The stock rose 7.5p to 580p.

But it was mining group Lonmin which topped the risers’ board with a gain of 52p to 3114p after the International Finance Corporation invested $20m (€14.7m) in the company’s shares.

The rest of the mining sector did not fare so well as BHP Billiton fell 50p to 1298p and Xstrata dipped 69p to 2725p.

The upbeat news on interest rates helped buoy retailers, with B&Q owner Kingfisher ahead 0.25p at 211.75p. In the second tier Debenhams cheered a 2% rise, or 2.5p to 123p while bike and car parts retailer Halfords rose 2.75p to 384.75p.

Elsewhere, in the FTSE 250 Index, National Express shares dipped 9p to 1138p as the market downturn wiped out gains following the company’s success in winning the East Coast Mainline franchise. Speculation about the contract award lifted shares in the transport group by 8% yesterday.

The biggest Footsie risers were Lonmin up 52p at 3114p, Scottish & Newcastle ahead 7.5p at 580p, BT Group up 2.5p at 310.5p and Capita Group ahead 5.5p at 739p.

The biggest fallers were Yell Group down 18p at 454.5p, Johnson Matthey off 63p at 1627p, BHP Billiton down 50p at 1298p and Experian off 20.5p at 534.5p.