A raft of economic data from the US and China fuelled fears over the global economic recovery today and hit confidence on the London market.
The FTSE 100 Index closed 55.9 points lower at 5566.9 as US jobless figures showed the country’s labour market struggling, while other data showed a 1.5% fall in home sales.
Mining and commodity stocks were the biggest Footsie fallers amid fears that the latest decline in China’s factory output meant further strain on global demand.
The US Federal Reserve cut its growth forecast for 2012 to 2.4% from 2.9% and disappointed investors by only extending its Operation Twist programme, under which it swaps short-term bonds for longer-term ones to help keep long-term interest rates low.
Fed chairman Ben Bernanke stopped short of unleashing a third wave of money-printing under its quantitative easing programme.
While immediate fears over Greece’s future in the eurozone have receded following the formation of new pro-austerity government, investors were still awaiting signs of improvement in Spain’s fortunes.
The country’s government sold nearly €2.1bn of bonds repayable in two, three and five years with yields at a 16-year high.
The pound was up against the euro at 1.24 as uncertainty in the eurozone continued to weigh on the single currency, while sterling fell against the US dollar to 1.56.
Among the biggest fallers, Vedanta Resources dropped 48p to 930p and Anglo American fell 114p to 2101p, while heavyweight stock BP was impacted by the latest fall in oil prices to stand 13.6p lower at 411.1p.
British Airways and Iberia firm International Airlines Group was one of the biggest top flight risers after it increased its target for annual revenue and cost synergies by €100m to €500m from 2015.
The update to shareholders at its AGM in Madrid caused its shares to rise 1.8p to 160.1p.
Household goods group Reckitt Benckiser rose 52p to 3419p as sentiment recovered following Procter & Gamble’s profits warning yesterday, while Unilever leapt 18p higher at 2080p.
Outside the top flight, engineering group Invensys was 14% lower after it said it was no longer in takeover discussions with US-based controls firm Emerson Electric. Bid speculation caused the rail signalling specialist to jump in value to around £2bn (€2.47bn) yesterday, but shares reversed 37p to 220p today.
Transport group Go-Ahead was nearly 2% lower, off 23p at 1196p, after it said profits at its rail division were likely to be under pressure next year due to economic conditions. The update offset a resilient performance in its bus division.
But Currys and PC World parent Dixons Retail Group was 7% higher in the second tier, up 1.2p to 17.2p, after it reported a resilient performance in its UK arm, with annual profits up 15% and sales bouncing back with an 8% rise in the final quarter.
The biggest Footsie risers were Reckitt Benckiser up 52p at 3419p, Compass Group ahead 8p at 660.5p, International Airlines Group up 1.8p at 160.1p and Sage Group ahead 2.7p at 270.2p.
The biggest Footsie fallers were Anglo American down 114p at 2101p, Vedanta Resources off 48p at 930p, Kazakhmys down 31.5p at 724p and Antofagasta off 42p at 1080p.