FTSE rattled by economy warnings

London’s blue-chip stocks fell almost 3% today as warnings over the UK and US economies shook fragile market sentiment.

Ratings agency Standard and Poor’s downgraded its outlook for the UK to negative for the first time in more than 30 years due to fears over a growing debt mountain.

This came after the US Federal Reserve said the world’s largest economy would see a bigger than expected fall this year. A rattled FTSE 100 Index closed 122.9 points lower at 4345.5, while the pound lost ground on the dollar and the euro.

Just five stocks survived the sell-off in the top flight, with miners and banking shares among the worst affected.

Among the handful in positive territory were drugs giants GlaxoSmithKline and AstraZeneca as investors moved their money in defensive ’big pharma’.

An analyst upgrade for Glaxo helped it rise 5p to 1063.5p, while AstraZeneca gained 11p to 2646p after announcing a preliminary injunction to stop a generic copy of one of its drugs.

But dealing screens were largely red as investors headed for the exit in a turbulent session.

Telecoms firm Cable & Wireless led the fallers board after posting full-year results. The slide for C&W – down more than 9% or 15p to 142p – came despite a better-than-expected 36% rise in underlying earnings to £822m (€938m). Analysts blamed a combination of profit-taking as well as worries over an uncertain outlook.

British Land shares meanwhile were down 8% or 34p to 380p after the property company said net asset value per share – a key industry measure – had fallen 64%, with pre-tax losses of more than £3.9bn (€4.45bn).

The leading Footsie faller was Kazakhmys, down 68p to 643.5p after a broker downgrade, although miners generally were out of favour on the gloomier economic news. The rare exception was platinum miner Lonmin – one of the few to make the risers’ board with a 12p gain to 1279p after Citigroup lifted its target price.

In the second tier, pubs group Mitchells & Butlers fell 9% after it said chief executive Tim Clarke had quit the group because of a £69m (€79m) loss on an interest rate hedge. Pre-tax profits also fell 48% to £44 million, causing shares to fall 23.5p to 237.75p.

Defence industry firm Qinetiq moved higher, up 0.25p to 144p, after it reported a sharp rise in annual profits and said trading prospects had been lifted by a healthy order book in North America.

And the Daily Mail and General Trust slipped more than 3% as the group reported a 47% slump in half year profits amid poor advertising revenues. Shares fell 10.5p to 301p.

The four Footsie risers were Tullow Oil up 34p at 980p, Lonmin ahead 12p at 1279p, GlaxoSmithKline up 5p at 1063.5p and AstraZeneca up 11p at 2646p.

The biggest Footsie fallers were Kazakhmys down 68p to 643.5p, C&W off 15p to 142p, Eurasian Natural Resources down 57p at 558p and Icap down 36.75p at 367.25p.