FTSE suffers more economic gloom with 3% fall

London’s FTSE 100 Index shed 3% today as fresh economic gloom weighed on commodity stocks to drag the market lower.

The Footsie was off 127.1 points at 4102.4 by mid-morning, with miners taking the worst of the punishment.

The first acknowledgement of a likely UK recession from Bank of England Governor Mervyn King, meanwhile, did nothing to aid sentiment as the pound hit a five-year low against the dollar.

Vedanta Resources led the Footsie fallers with a decline of more than 11%, or 81p to 632p. Oil and metals are bought and sold in dollars and the greenback’s strength caused prices to fall amid continuing fears of a global demand slump.

Kazakhmys and Xstrata – down 28.25p at 276.75p and 74.5p at 996.5 respectively - also featured prominently among the losers.

Many bank shares were on the back foot as Mr King also called the recent turmoil the biggest threat to the system in nearly a century.

RBS sagged more than 8% or 6.6p to 72.7p as analysts at Keefe, Bruyette & Woods slashed earnings forecasts. Barclays fell 10.5p to 232p.

Another blue-chip casualty was satellite broadcaster BSkyB after research said nearly a fifth of UK consumers planned to cut spending on television channels over the next year. Shares fell more than 9% or 37.5p to 364.5p.

Elsewhere, shares in home improvement firms were under pressure after half-year results from Homebase and Argos owner Home Retail Group.

Home slashed £542 million from the value of Homebase and warned of the impact of recent financial turmoil on profits. Shares fell 1% or 2.75p to 191.25p.

B&Q owner Kingfisher fell 8.9p to 104p following the results, while Currys firm DSG International slid 8% or 2p to 23.75p. It is due to post a trading update tomorrow.