Credit crunch in America leans heavily on FTSE

Renewed fears regarding the US housing market and the global credit crunch saw the London market grounded in negative territory today.

The FTSE 100 Index dropped 81.7 points to 6446.2 by mid-morning, tracking losses on Wall Street on Friday and across Asia overnight.

The Dow Jones slumped nearly 3% at the end of last week, on the 20th anniversary of Black Monday, after a raft of disappointing corporate results and a warning over continued turmoil in the US housing market from construction equipment giant Caterpillar.

Financial Times publisher Pearson led a handful of blue-chips risers after it said advertising revenues had remained “resilient” despite the recent turbulence in financial markets. The stock was 12p higher at 777p.

At the other end of the board, power station group British Energy slumped almost 9%, or 51.5p to 527.5p, after it said that four of its nuclear power reactors would remain off-line for longer than expected in order to carry out repairs to boiler units.

Meanwhile a broker downgrade from Citi impacted the mining sector, with Antofagasta falling 6%, or 48p to 770.5p, Vedanta Resources off 89p at 2074p and Anglo American down 131p at 3069p.

Housebuilders remained out of favour after the latest survey from Ernst & Young revealed the market looked set to stall next year, although it added that a major recession appeared unlikely.

Taylor Wimpey lost 7p to 244p and Barratt Developments was 5.5p lower at 661.5p. However, a positive note from HSBC buoyed real estate investment trust Hammerson 5p to 1049p.

Oil majors gave back some of their recent gains as oil prices retreated from last week’s record highs. BP dipped 2.5p to 608.5p and Royal Dutch Shell slipped 15p to 2036p ahead of their interim results later in the week.

Tullow Oil dived almost 5%, or 27.5p to 594p after UBS downgraded the stock, warning shares looked expensive after a 48% rise over the past two months.