London joins global gloom

There was more severe pain for global stock markets yesterday and London was no exception, with the main UK stock market benchmark, the FTSE 100 index, suffering its second consecutive three-figure slide.

Bob Semple, UK equity market strategist at BT Alex Brown said: "Equity markets are likely to remain turbulent for some time. If we start to see significant profit downgrades hitting the corporate sector as well, both in the UK and elsewhere, then the correction phase could be worse than down 20 per cent. Investors prepared to back the long-term view should be buying into any weakness."

But he emphasised: "While the economic ramifications of Russian financial instability and recession in Asia may not be massive for the UK, they are certainly hurting sentiment in international equity markets and pushing investors towards government bonds."

The FTSE 100 was left nursing a 176.9, or 3.2 per cent decline at 5,368.5, for a two-day fall of 285.9, or 5.1 per cent. At its worst, just before the close of trading, the FTSE 100 was down 191.9.

Second liners had to absorb heavy losses. Lingering worries that the FTSE 250 might lose the 5,000 mark were confirmed with that index plunging through 4,900 and finishing 125.0 lower at 4,897.0, a fall of 2.5 per cent in a single session.

The performance of the SmallCap was even worse than the midcap, that index reversing 64.0 to 2,187.4.

Steep declines in London shares spread right across the board, unlike some of the recent sessions which had seen the main thrust of selling generally confined to the leaders.

Again, it was the economic and financial crises gripping Russia that sparked the sell-off in world stock markets, with leading European bourses, notably Frankfurt and Paris, sustaining more big losses,

Those falls came on the heels of an overnight 79-point slide in Wall Street's Dow Jones Industrial Average and widespread weakness among most of the Asian markets, especially Tokyo, which dropped over 3 per cent. Hong Kong managed a 1 per cent rise, amid suspicions that the government had continued to prop up the market.

Among the share losers, aero engines maker Rolls-Royce tumbled 8.1 per cent - by 18p to 203p - after interim results came in at the bottom end of expectations. Dealers said the fall may also contain an element of profit taking after gains made earlier in the week from the British Airways-Airbus deal.

Other exporters were amongst the Footsie's biggest losers with Cable & Wireless dropping 72p to 646p and LucasVarity down 15 1/2p to 216p.

Profits beat City expectations at leisure and hotels group Ladbroke, although the company reported that the strong pound wiped £102.9 million off turnover at its hotels.

Newcastle United shares were promoted by 6 1/2p to 63p after manager Kenny Dalglish was ousted and replaced by former Chelsea boss Ruud Gullit.

Elsewhere in the sector, Nottingham Forest announced spiralling losses for the year but stressed there would be an increase in income from television and broadcasting revenues this season. Shares were down 1p at 37 1/2p.

Winners were Tesco up 1p to 160p, Zeneca up 14p to £23.80, Thames Water up 6p to £10.72 and Boots up 3p to £10.03.

Losers were Blue Circle down 53p to 261p, Standard Chartered down 80p to 507p, Tomkins down 28 1/2p to 241 1/2p and Cable & Wireless down 72p at 646p.

The gloom encompassing London was not all down to global turbulence. The latest Confederation of British Industry survey of monthly trends painted a picture of relentless gloom in manufacturing, calling on the government to implement an early cut in interest rates to prevent the economy sliding more than necessary, while still reaching its 2.5 per cent inflation target.