FTSE slides as market sceptical about US
Jan 22 2008 by Iain Laing, The Journal
ABOUT £60bn was wiped off the value of leading companies yesterday as the FTSE 100 Index plunged 5.5% amid fears of a US recession.
The Footsie dropped 323.5 points to 5578.2 at the close of trading, hitting its lowest levels for nearly 18 months.
At one point, the index was down 329 points – nearly 6% – more than the drop triggered by the September 11 terrorist attacks in 2001.
The fall continues an unprecedented slide in the index this year amid a gloomy outlook for economies around the world. Other markets in Europe have also plunged more than 5% on the back of the poor sentiment.
Shares in London fell after Asian markets dropped up to 4% overnight and following falls in New York for the Dow Jones Industrial Average.
Investors across the Atlantic were unimpressed by President George Bush’s plans to stimulate the all-important US economy.
The Footsie is now down nearly 12% on the opening mark of 6456.9 this year – the worst start to a year since records began in 1936.
Broker Hargreaves Lansdown’s head of UK equities Richard Hunter said investors in London were battening down the hatches as US recession fears gripped the market.
He said: “People aren’t buying the US bail-out story and that feeling has been exacerbated by the weakness overnight in the Asian markets.
“The other thing we have seen today is a lack of buying interest – people are battening down the hatches while they see what happens in the US.”
Last week the Footsie dipped below 6000 for the first time since the start of the credit crunch last August.
The CAC-40 in Paris was down more than 5% yesterday and the Dax in Frankfurt was down almost 5% as they digested the news from across the Atlantic.
On Friday, President Bush unveiled plans for a package of measures worth billions of dollars to help avoid a downturn in the US economy.
He said the growth package would have to be big enough to make a difference to the large and dynamic US economy.
Analysts are worried the tax breaks and spending measures will do little to boost consumer spending in the US because of problems in the housing market.
The world’s biggest economy has been teetering on the brink of a marked downturn, with the continuing credit crunch and fall-out from the collapse of its sub-prime mortgage market compounding America’s troubles.
The US has seen its housing market collapse in recent years, while disappointing economic data has been released on almost weekly.
Only last week, Merrill Lynch suffered its biggest quarterly loss since being founded 94 years ago, which came just days after fellow US banking company Citigroup sent global stock markets plummeting after it disclosed a £5bn fourth-quarter loss.
