Concerns over the fragility of the US economic recovery sent stocks tumbling on both sides of the Atlantic today.
The FTSE 100 Index in London came under further pressure as disappointment over the latest US unemployment figures saw early gains turn to heavy losses.
The Footsie closed down 71.7 points at 5145.7 – its lowest close for nearly three months and a reversal on the more than 60 point gain seen earlier in the session.
Sentiment was hit after a drop in new US jobless claims came in short of expectations and as American factory orders rose only slightly.
The Dow Jones Industrial Average dropped 1.6% within the first few hours of trading as optimism over yesterday’s interest rate decision and State of the Union speech faded fast.
Trading had been boosted by relief over President Barack Obama’s State of the Union address, which saw him pledge to create more jobs and spur growth in the world’s largest economy.
US policymakers also voted yesterday to leave interest rates unchanged – as expected – and maintained their pledge to keep borrowing costs low for an extended period.
While this eased worries about the prospect of tighter monetary policy, the reaction to today’s economic figures in the US highlighted stock market fragility and concerns over the global recovery.
The US stock market plunge sent investors rushing to the dollar as a safe haven, with the greenback rising against both the pound and euro as a result.
Among UK stocks, the biggest fall in the top flight was posted by AstraZeneca after analysts expressed disappointment at the content of the drug company’s annual results, particularly its guidance for 2010 earnings.
The company is stepping up its efficiency drive with another 8,000 job cuts over the next four years, but this was not enough to prevent shares from falling 5% or 140p to 2905p.
Miners were also caught in the wider market sell-off, with Xstrata leading the declines with a 45.5p fall to 1004.5p.
BSkyB was among early risers after it reported a 4% rise in half-year profits to £401m (€463m), but shares failed to remain in positive territory, falling 14p to 540p by the close.
Outside the top flight, the spotlight was also firmly on Mitchells & Butlers as its board conceded defeat today after a bitter battle with rebel shareholders claimed the scalp of its chairman.
The group will now have a new-look board line-up following votes at an investor meeting in Birmingham and shares lifted 1.8p to 275.4p.
Shares in sugar producer Tate & Lyle fell 5% after it said full-year operating profits were likely to be marginally below last year. The stock, which recently dropped out of the FTSE 100, fell 18.4p to 388.7p.
Transport firms dominated the second-tier risers board after Arriva announced it was in merger talks with European bus and coach operator Keolis.
Arriva shares rose 13.5p to 481.4p, while hopes for further consolidation lifted National Express 6.5p to 212p.
The biggest Footsie risers were Carnival up 36p at 2272p, Next ahead 25p at 1950p, RSA Insurance up 1.2p at 129p and Fresnillo up 5p at 677p.
The biggest Footsie fallers were AstraZeneca down 140p at 2905p, Xstrata off 45.5p at 1004.5p, Antofagasta down 35.5p at 885.5p and Man Group down 8.5p at 237.5p.