FTSE in freefall as recession looms

Almost £49bn (€61.4bn) was wiped off the value of blue-chip shares today as fears mounted about the scale of the recession facing the UK and world economies.

Official figures revealing a worse-than-expected 0.5% third quarter fall in UK economic growth – the first negative reading in 16 years – compounded an already poor start to trading, with the FTSE 100 Index down 9% at one stage.

Devastating opening falls on Wall Street added to the sell-off, although the Footsie later recovered some ground to close 204.5 points down – a fall of 5% - to 3883.4.

The decline was mirrored across Europe, with the Cac 40 in France finishing 4% lower and the Dax in Germany down 5%.

US investors also reacted to widespread fears the global downturn would be deeper than first feared, with a wave of profit warnings adding to the negative sentiment.

The Dow Jones Industrial Average dropped almost 500 points on opening, later standing 3% down.

In London, GDP figures showing the UK’s worst performance in almost 18 years added to the pain for the FTSE.

Signs of trouble in emerging economies such as South Korea and Argentina meant banking giants HSBC and Standard Chartered led the latest banking sell-off.

Both have been relatively unscathed by the turmoil so far, but suffered because of their exposure to emerging markets in Asia. HSBC endured a drop of 14% or 109p to 696p while Standard Chartered slumped 142p to 758p.

Other banking stocks were down on growth fears, with Barclays off 26.25p at 192p and HBOS down 12.9p at 59.9p – putting it at the top of the fallers board.

Lloyds TSB set out the timetable for its takeover of the Halifax owner, but the hefty HBOS fall could reinforce fears that it may walk away from the deal.

Miners were the other major casualties of the session after declines of 64.5p to 329p for Eurasian Natural Resources and a drop of 62.5p to 777.5p for Xstrata.

BP and Royal Dutch Shell were also down – 25p at 440p and 72p at 1427p – as slowdown fears countered any oil price benefit from Opec’s decision to cut production.

The latest stock market collapse also reignited worries about the solvency capital levels held by insurers.

Friends Provident declined the most in the sector, down 11.1p at 54p, while Prudential was off 13% or 43.5p to 286.5p after the Financial Times said the insurer was looking at parts of America’s AIG beyond its Asian operations.

National Express was another faller, down 5%, or 32.5p to 577.5p, after it said the travel industry was not immune to an economic slowdown, despite further evidence of growth in its most recent trading period.

The biggest FTSE risers were BHP Billiton up 45.5p at 868.5p, Rio Tinto ahead 37p at 2277p, WPP Group up 5.25p at 323.75p and Reckitt Benckiser up 41p at 2598p.

The biggest Footsie fallers were HBOS down 12.9p at 59.9p, Friends Provident down 11.1p at 54p, Eurasian Natural Resources down 64.5p at 329p and Standard Chartered off 142p at 758p.