Blue-chips hit six-month low on interest rate fears

The FTSE 100 index slumped below 6,000 yesterday, hitting a six-month low, just a month after closing at its highest ever level. The interest rate worries that have plagued the British market for the best part of a fortnight again proved too much for investors. Footsie fell 148 points or 2.4 per cent to close at 5,978.4, its lowest finish since February 12th and 9.7 per cent below its all-time closing high of 6,620.6 reached on July 6th.

Mr Bob Semple at Deutsche Bank said: "As bond yields head higher, the fall in equity markets is developing into a serious correction which could see further falls of 300 to 400 points over the next few weeks."

Following the recent trend, it was the telecoms and banking sectors that bore the brunt of the selling pressure that led the market lower.

An even steeper fall on the index was prevented by the advance recorded in market heavyweight BP Amoco. Britain's biggest company reported a 19 per cent rise in second-quarter pre-exceptional profits. Not everyone was down-hearted about the direction of the market. Mr Robert Buckland at Salomon Smith Barney said: "With the market down 10 per cent from its peaks, we are advising clients to dip their toes in at these levels." Turnover at the 6 p.m. count was 1.11 billion shares.