A turbulent session for world markets left the FTSE 100 Index at its lowest level for more than three years tonight.
The Footsie’s slide of more than 5%, or 269.7 points to 4818.8, came after the nationalisation of Bradford & Bingley, a state bail-out of Belgium’s Fortis and a takeover of US bank Wachovia by Citigroup.
The latest blows to confidence overshadowed the bail-out of the US financial system, which looked set to win political support. Even this development was seen in a negative light, as analysts digested the potential implications of the deal and the stronger spending controls due to be imposed by lawmakers.
Weaker commodity stocks amid fears over the impact of a slowing world economy also hampered the London market, which lost £64 billion in value and suffered its worst percentage fall since January.
In London, Royal Bank of Scotland was the most traded stock – down nearly 13% or 27p to 181p – after its ABN Amro takeover partner Fortis was rescued.
As part of the deal it emerged that Fortis must sell its stake in ABN, bought as part of the RBS-led consortium’s takeover last year – unsettling the bank’s investors.
The nationalisation of B&B added to the pain, particularly as Spain’s Santander is now an even greater presence in the UK market through the acquisition of its branches and £20 billion savings book.
Merger partners HBOS and Lloyds TSB were both sharply lower, down 18% or 31.3p at 142p and 13% or 33.75p to 217.25p respectively.
HSBC, down 2% 14p at 865p, was the only bank left unscathed as its well-capitalised position drew fresh praise from Collins Stewart.
But the fragile nature of the markets was highlighted by a trading statement from interdealer broker Icap, the Footsie’s leading faller.
Fears over second half trading caused shares to fall 24% or 89.25p to 289.25p, despite strong first half volumes on the back of high levels of volatility in financial markets.
Tour operator Thomas Cook held firm, unchanged at 202.75p after posting a strong trading update. The reduction in supply caused by the recent collapse of rival operator XL also meant TUI Travel sounded positive noises, but shares were lower from the start and closed 8.5p lower at 212.5p.
Meanwhile, the latest worries for the financial sector dealt another blow for housebuilding shares, with confidence also rattled by a further sharp fall in mortgage lending figures from the Bank of England. Taylor Wimpey was down 8.25p at 34.75p while Barratt Developments 19.5p lower at 102p.
Camera retailer Jessops bucked the gloomy trend by announcing a deal with banks to extend existing debt facilities. Despite further sales pressure, shares in the small-cap stock were 42% higher, up 1.08p at 3.64p.
The only Footsie riser was Morrisons, up 1.25p at 247.25p.
The biggest fallers were Icap down 89.25p at 289.25p, Man Group off 68.25p at 305.5p, HBOS down 31.3p at 142p and Xstrata off 334p at 1578p.