FTSE rally proves short lived

The market rally following efforts by central banks to tackle the credit crunch proved short-lived today as the FTSE 100 Index fell 2%.

The market rally following efforts by central banks to tackle the credit crunch proved short-lived today as the FTSE 100 Index fell 2%.

Growing scepticism over Tuesday’s liquidity rescue led by the US Federal Reserve sent Wall Street and Asian markets lower overnight, with Hong Kong’s Hang Seng down nearly 5%.

The gloom overshadowed trading in London, with the Footsie slipping 113.8 points lower to 5662.6 by mid-morning after two sessions of strong gains.

The lingering fears over the prospects for the US economy also sent the dollar plunging against the euro and the pound, which now buys almost US$2.04. It also fuelled oil prices of more than US$110 as investors turned to the safe haven.

The biggest fall of the session came from building supplies firm Wolseley, which carries out a large amount of its business in the United States. Shares were down by almost 6%, off 33p at 554p.

The heavyweight banking sector also littered the fallers board, with Barclays off 18p to 442.75p, Royal Bank of Scotland down 13.25p to 345.5p and Lloyds TSB slipping 15.5p to 428.5p as the credit fears resurfaced.

Morrisons shares were under pressure during chairman Ken Morrison’s final day in charge. Standing down after 55 years with the firm, Morrison pleased investors by reporting a 66% rise in annual profits.

However, the market slowdown knocked sentiment and left the supermarket’s shares 4p lower at 291.25p, or 1%.

Among the handful of firms in positive territory consumer giant Unilever was the leading performer, up 29p to 1629p as investors warmed to more upbeat comments about growth prospects this year from Swiss rival Nestle.

Scottish & Southern Energy also gained 21p to 1441p as rumours of potential interest from German-owned RWE circulated.

The sector was one of the few bright spots of a difficult session as International Power and National Grid gained 6p to 385.75p and 5p to 715.5p respectively.

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