Disappointing US jobs figures brought an abrupt end to stock market recovery efforts today as the FTSE 100 Index slumped 1.6% into the red.
Equities worldwide tumbled after the closely-watched data came in worse than expected, with the Footsie closing down 85.2 points at 5126.
America’s Dow Jones Industrial Average plunged more than 2% following the news that US employers added 431,000 jobs in May – boosted by one-off factors and short of market expectations.
The euro fell to a fresh four-year low against the US dollar as nervous investors piled out of riskier assets, with the single currency falling below the psychological $1.20 level at one stage.
Euro weakness also saw the pound hit €1.21 – its highest level since November 2008 – before easing back slightly.
Among stocks, oil major BP’s efforts to halt the Gulf of Mexico oil spill were also in the spotlight, but early gains today were mostly wiped out by the sell-off.
BP shares were 4% ahead at one stage but showed more modest advances of 1.1p to 433.4p later as chief executive Tony Hayward said it would take another 48 hours to judge the latest effort to resolve the crisis.
The BP boss gave few hints on the fate of the dividend, but added the oil major’s strong balance sheet gave it flexibility despite a “severe” financial impact.
Elsewhere insurer Prudential lost 9.5p to 556p despite gains earlier as the company indicated its failure to land bid target AIA would not cost the jobs of its top managers, including chief executive Tidjane Thiam.
But heavyweight mining stocks and banks also weighed on the index amid renewed concerns over the global recovery, while a 0.5% fall in UK house prices during May also dented sentiment. Royal Bank of Scotland was the leading blue-chip faller, losing 5% or 2.5p to 43.5p.
With little corporate news, broker comment drove many share price moves. B&Q owner Kingfisher was 8p lower at 221.6p after gains yesterday as brokers at Citigroup said the upside for the company looked limited after its cautious first-quarter trading update.
Fellow retailer Home Retail Group – the owner of Argos and Homebase – was also a prominent faller as Shore Capital analysts predicted a subdued trading update from the firm next week amid consumer uncertainty. Shares lost 8.4p to 242p.
Another retailer on the back foot was video games and consoles firm Game Group in the FTSE 250. The shares were down 6.9p to 92.7p despite a broker upgrade as KBC Peel Hunt lifted its target price on the stock.
Elsewhere Corgi-to-Airfix model firm Hornby was off 5.8p to 127.5p after a 9% fall in annual profits.
The biggest Footsie risers were Amec up 8.5p to 812p, Autonomy ahead 18p to 1799p, Icap up 2.7p to 394p and Vodafone up 0.9p to 138.7p.
The biggest Footsie fallers were Royal Bank of Scotland down 2.5p at 43.5p, Vedanta Resources off 120p at 2175p, Kazakhmys down 59p at 1119p and Segro down 13.5p at 275.5p.