FTSE plummets on double-dip fears

London’s leading share index suffered its biggest daily fall for almost three years after bleak comments from US Federal Reserve chairman Ben Bernanke again raised double-dip recession fears.

The FTSE 100 Index closed more than 4% or 246.8 points lower at 5041.6 – its worst points drop since November 2008 – as mining and financial shares took a pounding on worries over the US economy.

The pound hit a one-year low against the dollar, dropping as low as 1.53 at one point, after the greenback was seen as a safe haven currency despite the US’s woes. Sterling held steady against the euro at 1.14.

The Fed’s plans to launch a $400bn (€297bn) programme to reduce borrowing costs were also met with disappointment, but it was Mr Bernanke’s warning that there were “significant” risks to the US economy that traders said cut the legs from under the market. The Dow Jones Industrial Average plunged over 3% to follow yesterday’s losses of 2.5%.

The slump spread to European markets, with the Dax and the CAC 40 both down by nearly 5% after data suggested that the eurozone’s economy has almost ground to a halt.

Commodity stocks led the rout in London as investors feared a slump in demand for mineral resources. Fallers included Vedanta, 171p lower at 1117p, Kazakhmys, off 119.5p at 846.5p and Antofagasta 141.5p lower to 972.5p.

Financial stocks were also battered after Moody’s downgraded the credit ratings on three big US banks and argued that the US government was more likely to allow a major institution to fail because contagion could be contained.

Barclays was down 9% or 14.4p to 138.9p while Lloyds Banking Group slumped 3.7p to 32.5p. Among the insurers, Prudential was hardest hit after shares fell 42p to 555p, off 7%.

Even luxury goods group Burberry suffered in the sell off, with its shares nearly 10% lower, off 148p at 1361p.

There were no risers in the FTSE 100 Index, but in the second-tier easyJet made impressive progress after it announced plans for a shares windfall.

In a move set to placate founder and major shareholder Stelios Haji-Ioannou, the airline announced a £150m special dividend, on top of a £40m maiden dividend for the year to September 30.

It added that cost cuts and good demand on city routes used by business and weekend break travellers meant profits for the year were likely to be between £240m and £250m, up from previous expectations.

Shares rose 9% despite the wider market turbulence, up 28p to 340p.

Another notable gain in the FTSE 250 Index came from JD Sports Fashion, which added 2p to 832.5p in the wake of half-year results on Wednesday.

There were no risers on the FTSE 100 today.

The biggest Footsie fallers were Vedanta Resources down 171p at 1117p, Antofagasta off 141.5p at 972.5p, Kazakhmys down 119.5p at 846.5p and Fresnillo off 226p at 1709p.