London slumps on Wall St holiday hangover

The FTSE 100 Index slumped by 5% today after last week’s spectacular gains were erased by a post-holiday hangover on Wall Street markets.

Worries over the extent of American consumer spending over Thanksgiving weekend added to an earlier sharp reversal for mining stocks on European markets. Poor economic data, including a 26-year low for manufacturing activity in the United States, meant global recession fears continued to haunt investors.

The Dow Jones Industrial Average was 5% lower by the time of London’s close, while the FTSE 100 Index ended down 222.5 points at 4065.5. The top flight index added 500 points last week but investors took the recent rally as an opportunity to book profits, particularly among volatile miners.

Platinum firm Lonmin led the fallers board after a drop of 18% or 155.5p to 696.5p, while Kazakhmys fell 16% or 42.75p to 217p and Vedanta Resources slid 95.5p to 516p.

As well as the weaker mining sector, most retail stocks were under pressure following the release of more poor sales data from John Lewis and expectations that Tesco will post its worst sales figures since the early 1990s tomorrow.

Stocks came off their lows towards the end of the session amid growing hopes that the Bank of England will slash another percentage point from interest rates later in the week.

With a poll of analysts ahead of Tesco’s third quarter update pointing to UK like-for-like sales growth of just 1.9%, shares in the grocery heavyweight closed 2% or 7.3p lower at 288p.

Sainsbury’s fell 7.75p to 279.25p and Morrisons – due to post figures later in the week - slipped 4.75p to 237.75p.

The latest John Lewis weekly sales figures, which showed another 13% drop in sales, unsettled shares in a number of mid-market firms.

Marks & Spencer lost 2% or 5p to 220.75p, while B&Q owner Kingfisher fell more than 7% or 8.9p to 110.6p and fashion chain Next declined 105p to 1003p, a drop of more than 9%.

In the FTSE 250 Index, Currys and PC World owner DSG International was 1.94p lower at 9.81p, while Debenhams fell 0.5p to 23.75p.

One of the biggest gains of the session came from furniture retailer Land of Leather after the chain confirmed it had received preliminary takeover approaches.