Fears over the US financial sector sent blue chips more than 2% lower today in another turbulent session for the London market.
Lingering concerns over beleaguered US mortgage giants Fannie Mae and Freddie Mac hit financial stocks hardest in heavy early falls on Wall Street.
The FTSE 100 Index fell 2.4% or 128.5 points to 5171.9 – its lowest close since October 2005 – but touched trading lows not seen since London’s 7/7 attacks three years ago at one point in the day.
Although US markets pared back falls later as Treasury officials said they had no immediate plans to extend aid to the two firms, Asian markets dived earlier on reports that banks in Japan, Taiwan and South Korea held more than 65 billion US dollars in debt issued by the duo.
Banks, which had yesterday been boosted by A&L’s planned £1.26 billion sale to Spain’s Banco Santander, were punished in London.
Royal Bank of Scotland was the worst hit in the top flight, falling 7% or 12.7p to 167.3p. Lloyds TSB and Barclays both fell 3%, registering falls of 9.25p to 273p and 9.25p to 260.5p respectively.
A&L in the FTSE 250 lost more than 3%, or 10.5p to 324.5p, after yesterday’s impressive gains, with fellow second tier bank Bradford & Bingley – which had risen on speculation it could be sold next – down 4.25p at 48.75p.
Meanwhile, weaker metal prices meant Vedanta Resources slid 117p to 1893p and Antofagasta eased 37.5p to 547p in a poor session for the mining heavyweights.
The gainers were in the minority as investors turned to defensive shares to ride out the falls. Pharmaceutical firms GlaxoSmithKline and AstraZeneca were higher as a result, up 5.5p at 1187p and 12p at 2276p.
But falling crude oil prices late in the session on US economic fears gave a boost to travel companies. Thomson owner TUI Travel was the leading riser, up 5.7p to 176.6, while Thomas Cook added 3.7p to 179.5p
Elsewhere, telecoms firm BT lost almost 5% – or 9.7p to 192.3p – after it suspended its share buyback programme in order to focus on its £1.5 billion investment in “super fast” broadband.
Outside the top flight, camera retailer Jessops fell 31%, or 2.38p to 5.37p, after it said trading conditions had deteriorated significantly, with sales down on average by 11% over the past three weeks.
But shares in FTSE 250 oil and gas company Imperial Energy continued to soar, up 18% today following a similar gain yesterday on news of a bid approach. Imperial’s shares rose 164p to 1074p.
The four biggest Footsie risers were TUI Travel up 5.7p at 176.6p, Tesco ahead 10.1p at 364.7p, Thomas Cook up 3.7p at 179.5p and Morrisons up 4p to 261p.
The biggest Footsie fallers were Royal Bank of Scotland down 12.7p at 167.3p, Carphone Warehouse off 13.2p at 185.5p, Antofagasta down 37.5p at 547p and Vedanta Resources off 117p at 1893p.