The FTSE 100 Index dived back towards bear market territory today as the prospect of more economic woes caused misery for traders.
The Bank of England’s widely-expected decision to hold interest rates at 5% offered no relief as investors failed to shake off a miserable start following yesterday’s 2% plunge on Wall Street.
The Footsie ended the day 122.8 points down at 5406.8, a fall of more than 2% and its lowest close since November 2005.
Current inflationary pressures mean investors have not been able to rule out a rate hike in the coming months, sparking even more gloom over the high street and housing markets.
Most of the retail sector was on the back foot after a sector downgrade from investment bank Goldman Sachs. B&Q owner Kingfisher was the biggest casualty - off 5.5p at 99p – but Next also fell 5p to 895.5p and Carphone Warehouse slipped 9.95p to 196.8p.
Cadbury led the Footsie fallers after Merrill Lynch downgraded the confectionery firm to underperform and reduced its price target to 575p. Shares fell 48.5p to 598.5p, a drop of 7.5%, while fellow consumer product firms Unilever and Reckitt Benckiser eased 68p to 1415p and 129p to 2520p respectively.
Associated British Foods, which reported weaker sales growth at its Primark discount fashion chain, fell 29.5p to 738.5p, even though rising prices caused revenues at its grocery division to jump 30%.
In the FTSE 250 Index, Sports World owner Sports Direct International fell 8.25p to 63.5p after profits slid 51% and chairman Mike Ashley reported the worst trading conditions in 25 years.
There was some positive news from the housebuilding sector after Barratt Developments announced a deal with lenders to strengthen its finances.
Barratt painted a bleak picture on current trading, but shares were still 13p higher at 67p, a gain of 24% in the FTSE 250. Taylor Wimpey, which has its own financing difficulties to resolve, lifted 4.75p to 35p while Charles Church owner Persimmon added 9.25p to 257p and Bellway rose 27p to 461.75p.
A return to form for commodities also helped the market, with Eurasian Natural Resources up 2% or 20p at 1047p and Vedanta Resources ahead 56p at 2007p among the blue-chip stocks in the black.
Marks & Spencer joined them as investors eyed value after the sharp fall seen following last week’s profits warning. Shares were up nearly 3% or 6.25p to 240.25p.
Elsewhere, credit checking firm Experian received the backing of investors after a 1% rise in quarterly revenues proved better than City expectations. The stock held firm during the market’s initial sell-off and was later nearly 8% higher, up 28.5p at 389.75p.
The Footsie’s four biggest risers were Experian, up 28.5p to 389.75p, FirstGroup up 19.5p to 560.5p, Vedanta Resources up 56p at 2007p, and Marks & Spencer, which added 6.25p at 240.25p.
The four biggest fallers were Thomas Cook, down 18.65p to 183.6p, Cadbury down 48.5p to 598.5p, ICAP down 34.5p to 428p, and InterContinental Hotels which closed the day 49p down at 637p.