Uncertainty provokes huge fall for FTSE

The FTSE 100 Index plunged 4% in another panic-driven session today as world markets took a fresh battering from the Greek debt crisis.

In a return to the volatility seen at the time of the banking crisis, London's blue-chip index slumped to within 45 points of the 5000 barrier before closing 138 points lower at 5123, a drop of 2.6%.

It was also the top flight's worst week since March 2009 after losing £110bn (€127.8bn) or 7.75% since Monday.

The indecisive general election result - with Conservatives falling short of the winning line - added to fears over debt contagion in Europe.

The dramatic session for London investors began with a 100-point fall before the Footsie recovered its poise to stand in line with its opening mark.

However, markets worldwide then went into freefall, as the Dow Jones Industrial Average added to yesterday's dramatic 3.2% fall.

This was despite a report showing employers added 290,000 jobs - the most added in one month in four years - as traders were still spooked by yesterday's plummet, which at one stage saw the Dow lose 1,000 points.

Greece still played on investor's minds amid moves by European leaders to convince fearful markets that the Greek debt crisis won't spread to other countries and derail the continent's currency and economic recovery.

Political uncertainty saw the pound fall against the euro and to a year-low below 1.45 at one stage against the dollar.

But worries that political deadlock would lead to delays in tackling the UK's yawning deficit were allayed somewhat after Liberal Democrat leader Nick Clegg said the party with the most votes and seats - the Conservatives - should have the first stab at trying to form a Government.

Meanwhile, Conservative David Cameron signalled a potential deal, promising to work for "strong, stable government".

Sterling was later at 1.47 against the greenback and 1.15 against the euro.

Financial stocks were hit heavily for a second successive session as part-nationalised Royal Bank of Scotland fell 2.7p to 45.5p or 6%, even though it narrowed losses to £248 million for the first three months of 2010 and said turnaround plans remain "on track".

Lloyds slipped 3.1p to 53.3p but HSBC fared better - adding 1.2p to 629.6p after first quarter profits "comfortably ahead" of last year and an improving position on bad debts.

Support services group Capita was among the biggest Footsie casualties, down 46p to 770.5p or 6% after a downgrade from brokers at Shore Capital.

British Airways was another heavy faller after the airline's cabin crew overwhelmingly rejected an offer aimed at ending their long-running dispute. Shares dipped 12.4p to 192.2p.

Rival easyJet dropped 13.3p to 429.7p in the FTSE 250 after it said it had suffered 750,000 cancellations as a result of the Icelandic volcanic ash cloud.

Elsewhere in the second tier broadcaster ITV dropped 5.25p to 55.75p or more than 8% after new boss Adam Crozier reported rising revenues but warned the outlook for the latter part of 2010 and early 2011 looked tough.

The biggest Footsie risers were Xstrata up 14.7p to 1009p, Randgold Resources ahead 55p to 5635p, Rio Tinto up 21p to 3127.5p and HSBC ahead 1.2p to 629.6p.

The biggest fallers were Wolseley down 125p at 1411p, Thomas Cook off 16.6p at 215.7p, BT down 7.4p at 109.9p and AB Foods off 61p at 918p.