FTSE share prices 'could fall sharply'

Fears are mounting today of sharp drops in share prices when the London market opens tomorrow as last week’s falls on Wall Street renewed concerns of a repeat of Black Monday.

America’s Dow Jones Industrial Average shed 367 points on Friday – 20 years to the day after stock markets in the US and the UK experienced their biggest crash on record.

Friday’s fall, which was the biggest one-day drop since the start of the global credit crisis, came on the back of renewed fears of trouble in the credit markets, which have tightened dramatically, sparked off by soaring default rates on US sub-prime mortgages.

Nerves over oil reaching new records above 90 US dollars a barrel also played on investors.

But the bulk of the falls happened after London’s benchmark FTSE 100 Index closed and experts fear the market will react severely on Monday, mirroring the falls seen 20 years ago, when the Footsie dropped by 11% in one day.

David Buik, of spread betting company Cantor Index, said markets were “perfectly capable of falling sharply” following last week’s drops.

He added that economic conditions are similar to those in the US 20 years ago when Black Monday occurred, although he said better trading technology and greater market liquidity now should help avoid a direct repeat of the 1987 crash.

The UK stock market took some two years to recover from the impact of Black Monday, which saw the market fall 11% on the day, followed by a 12% drop the next day.

From peak to trough, the UK stock market fell by 31% throughout the crash, according to Halifax Financial Services.