US economy fears sends FTSE back into red

The FTSE 100 Index plunged back into the red today as persistent fears over the US economy and America’s sub-prime mortgage crisis ended a six-day run of gains.

London’s leading share index fell by almost 2% as volatility returned to the Footsie after last week’s rally, wiping £28.1 billion off the value of UK blue chips.

Poor consumer confidence figures out in the US spooked already nervous investors, sending the FTSE 100 down 117.9 points to close at 6102.2.

The data added to concerns sparked by a weak close on Wall Street yesterday.

America’s main index, the Dow Jones Industrial Average, fell a further 1% in early trading on today’s news that US consumers reined in their spending last month as turbulent financial markets and housing problems took their toll.

Justin Urquhart Stewart, director at Seven Investment Management, warned there would be further volatility to come until the full extent of America’s sub-prime mortgage meltdown is known.

He said: “The market cannot start to get any composure until we can find out how much damage it has done.

“At the moment everyone is guessing and it’s adding to nervousness.”

He added the market was likely to “bungee” between 150 points up or down until the default rates in the US high-risk home loan sector bottomed out.

The market had been making a strong recovery, enjoying six consecutive days of closing in positive territory before the long bank holiday weekend – a rally which saw the FTSE 100 gain 361.2 points, or more than 6%.