The FTSE 100 Index plunged nearly 5% today as banking and mining stocks fell on worries over the scale of the global downturn.
The blue-chip index shed 202.9 points to 4005.7 and briefly dipped below the 4,000 mark for the first time in a month as heavy falls on Wall Street also hit sentiment in London.
Traders in the US had been braced for a tough opening after the biggest monthly fall in inflation since records began provoked fears of deflation, while the struggling US housing market continues to shrink.
CMC Markets dealer David Fineberg said: “The near term outlook is bleak and there’s little to provide any sustainable support just yet.”
The mining sector was badly hit by recession fears, with Kazakhmys down 22% or 42p to 193p, the FTSE’s leading casualty. Vedanta Resources followed close behind, down 76.5p at 438p.
Banks were also suffering after JP Morgan Securities cut share price targets on several UK banks, including Barclays from 210p to 150p.
Barclays was already under pressure after attempts to smooth the passage for its Middle Eastern bail-out plan failed to appease shareholder lobby groups. Shares were down 19.9p at 129.6p during another turbulent session for the sector.
HSBC fell 64.5p to 641.5p, but HBOS gained 1.3p to 64.3p on the day Lloyds TSB shareholders were expected to back the takeover of the ailing bank. Lloyds however was also on the back foot, down 12.7p to 118.5p.
Elsewhere, Marks & Spencer shares fell 6% after it emerged the retailer planned to hold a one-day 20% off sale tomorrow. Further pressure on the stock, which declined 11.25p to 200p, came after Seymour Pierce cut its full-year profits forecast on M&S.
Citigroup was another City firm to express concern over M&S, as part of a wider downgrade of the sector. Currys owner DSG International was the biggest casualty from Citi’s review as shares tumbled 45% or 5p to 11p after touching record lows below 10p earlier.
Other fallers in the retail sector included Mothercare, which dropped 21.5p to 268.5p ahead of interim results tomorrow. Sports World owner Sports Direct International slid 4.75p to 32.25p and Debenhams fell 4.5p to 23.75p.
The biggest top flight gain of the session came from credit checking firm Experian – up 7% or 22.75p to 329.25p – after it posted first half results slightly ahead of market expectations.