Articles | London markets see shares plunge

FTSE sheds almost 8%

Published: Monday, 6 October 2008, 8:38AM

Around £96 billion has been wiped off the value of UK shares, with the FTSE 100 ending the day almost 8 per cent lower.

As world markets endured another Black Monday, the index saw its biggest one-day points fall since the 1987 crash and finished the day 391.1 lower at 4589.2 after banks and mining stocks were hammered.

Senior trader at ETX Capital, Manoj Ladwa, said: "Just when the market thinks it has found a base level, there's another jolt to the system. Black Mondays used to be a once-a-decade event - now they're coming along more regularly than a London bus."

Across the pond, the Dow Jones Industrial Average broke through the psychological 10,000 level and by 5.20pm had shed 469.0 points to trade at 9656.4.

US officials have called for a "forceful and co-ordinated" global response to the credit crisis as the Federal Reserve announced a series of steps to help it funnel massive amounts of liquidity to clogged credit markets, including boosting the sizes of cash auctions and offering banks interest on reserves.

Investors have taken little comfort from last Friday's $700 billion (£398bn) bail-out amid concerns that a US recession is still possible.

In the UK, Chancellor Alistair Darling, flanked by Prime Minister Gordon Brown, told a hushed House of Commons that the Bank of England will inject a further £40 billion into the financial system on Tuesday.

On a day featuring dozens of double digit percentage declines, the biggest among London's blue chip financials came from Royal Bank of Scotland, which is seen as being among the most vulnerable to a European banking meltdown. Shares were down 20 per cent, or 38.1p to 148.1p.

Halifax Bank of Scotland also shed some of the good gains seen last week, slumping back 39.7p at 160.8p, while its merger partner Lloyds TSB slid 20p to 270.25p, a fall of 7 per cent.

Insurers were also under pressure amid concerns about the impact of a falling stock market on the capital surpluses held by firms in the sector. Aviva fell 61p to 417p, while Prudential was off 69p to 429p.

Miners added to the pain after investment bank UBS warned earnings in the mining sector could fall by a further 46 per cent in 2008. It also said that commodity prices could drop another 25 per cent.

The whole sector tumbled, with Kazakhmys topping the FTSE fallers' board, off nearly 27 per cent or 151.25p to 417.75p. Eurasian Natural Resources was close behind, down 130p to 425p.

British Airways saw shares fall nearly 7 per cent after weaker passenger numbers on Friday and were off another 12 per cent or 20.4p to 145p on Monday after boss Willie Walsh reportedly said current conditions meant its tie-up with Iberia could take longer than expected.

Travel sector falls came despite a drop in oil prices to below $90 a barrel, their lowest level for eight months. Debt-laden firms were also shaken by the day's events, with housebuilder Taylor Wimpey down 7p at 27.75p and Mitchells & Butlers off 23.25p at 187p.

The FTSE's four biggest fallers were Kazakhmys, down 151.25p to 417.75p, Eurasian Natural Resources down 130p to 425p, Royal Bank of Scotland down 38.1p to 148.1p, and Xstrata which closed down 323p to 1357p.

Frankfurt's Dax ended the day 7 per cent lower and CAC 40 in Paris fell nearly 9 per cent despite the European Central Bank, the Bank of England and the Swiss National Bank pumping over $60 billion (£34bn) into markets.

More European governments have now moved to bolster protection of bank accounts after the German government announced on Sunday that it would guarantee all private bank accounts, joining Ireland, Denmark, Sweden and Greece in taking drastic independent action to ward off financial crisis.

Elsewhere, Iceland halted trading in its hard-hit banks and financial firms as the island's weakened currency slid further and the government scrambled to avert a fully-fledged market meltdown.