Economic warnings rock FTSE

The London market was rocked back on its heels today following economic warnings on both sides of the Atlantic.

Weaker projections for GDP and unemployment in minutes published last night by the US Federal Reserve were followed by a downgrade from credit ratings agency S&P on the outlook for UK debt.

The move from stable to negative was accompanied by a warning that a debt burden approaching 100% of GDP could threaten the UK’s AAA debt rating.

Sterling fell by more than 1% in the wake of the downgrade, while the downbeat mood left the FTSE 100 Index down 101.2 points to 4367.2 by mid-morning.

Just three stocks survived the sell off in the top flight, with miners and banking stocks among those affected.

Cable & Wireless and British Land led the fallers board after posting full-year results. The slide for C&W – down 8% or 12.8p to 144.2p – came as a surprise to the market given the company reported a better-than-expected 36% rise in underlying earnings to £822 million.

Analysts blamed profit taking and said there were worries that recent growth was not sustainable, particularly in light of an uncertain outlook.

British Land shares were down 5% or 26.5p to 387.5p after the property company said net asset value per share – a key industry measure – had fallen 64%.

In the second tier, pubs group Mitchells & Butlers fell 8% after it said chief executive Tim Clarke had quit the group because of a £69 million loss on an interest rate hedge. Pre-tax profits also fell 48% to £44 million, causing shares to fall 20.75p to 240.5p.

Defence industry firm Qinetiq moved in the opposite direction, up 2.75p to 146.5p, after it reported a sharp rise in annual profits and said trading prospects had been lifted by a healthy order book in North America.