FTSE endures worst week for six years

The UK's biggest companies slid to more stock market losses today in the worst week for the FTSE 100 Index for more than six years.

The declines end a recent two-month revival for the Footsie and come amid deepening fears over the global economy, a falling pound and record slumps in house prices.

Lower commodities prices have also hit the index as oil firms and miners make up around a third of the Footsie, while banks have also come under more pressure.

London's benchmark index tumbled 7% this week, bringing stocks back into "bear market" territory, more than 20% below last October's peak.

It is the worst fall since July 2002, when the Footsie followed US markets lower with an 8.5% plunge in the wake of financial scandals such as Enron and WorldCom.

Oil prices have fallen sharply from above US$118 a barrel to $105 this week as fears over the possible impact of Hurricane Gustav were unfounded, with concerns over a looming slowdown also denting demand.

Over the week FTSE All-Share oil and gas stocks have fallen more than 7%, while mining firms have slumped even further, losing 14%.

Alongside the pressure on commodity stocks, Footsie heavyweight Vodafone fell today after handset maker Nokia warned of a tougher outlook amid fierce competition and a weaker economy.

Meanwhile there was more gloom from the US after worse than expected jobless figures in August sent Wall Street to further losses.

Banks have also been under the spotlight amid uncertainty over what will happen when the Bank of England's Special Liquidity Scheme comes to an end on October 20.

Some analysts speculate that banks have borrowed as much as £200bn (€247.7bn) under the scheme, which allows them to swap riskier assets for safe Treasury bonds, and a further squeeze on lending could result unless it is extended.

CMC Markets chief dealer Paul Webb said: "The doom and gloom surrounding the global economic outlook could be sufficient to drag the index back towards July 2008 lows."

The Bank of England and European Central Bank gave no relief to markets this week by both opting to hold interest rates unchanged due to inflation concerns.

The Organisation for Economic Co-operation and Development (OECD) overshadowed an attempted fightback from British prime minister Gordon Brown with measures to revive the housing market by predicting that the UK would be the only major economy to enter recession this year.

Industry surveys have shown the UK's services, construction and manufacturing sectors all continuing to shrink in August.

Meanwhile, yesterday's Halifax house price index showed house prices falling further last month to stand at a record 12.7% below a year earlier - hitting consumer confidence and high street spending.

David Jones, chief market strategist at IG Index, added: "After some relatively calm trading throughout August we have seen a real swing in sentiment this week."