Leading UK shares closed 2.6 per cent down today as the New York share market skidded lower, with banks and oils singled out for rough treatment on recession fears and easier crude prices.
Traders said market confidence was draining away in the face of economic uncertainty and nervousness about an escalation of global tensions as the United States pondered its retaliation options after last week's hijacked plane attacks.
The FTSE 100 index closed down 127 points at 4,721.7 as market volume again surged to over two billion shares. Engineering and automation systems firm Invensys slumped to a fresh low as investors grew pessimistic over recovery, while Cable & Wireless dropped on a revenue warning.
Cable & Wireless dropped 12 per cent to 275p after it warned of falling revenues at its core Internet services business. It earlier touched a nine-year low at 270p on the news.
The company said in a long-awaited trading update that revenue in C&W Global was expected to fall five percent in the first and second halves of its current year. It blamed pricing pressures and a general malaise in the sector.
Invensys lost more than a quarter of its value, diving 25.6 pence to 42p as deepening economic gloom was seen making the company's recovery even harder, analysts said.
The share prices of many industrial and engineering firms have fallen in the past week amid fears last Tuesday's attacks in New York and Washington will tip the U.S. into recession.
In this industry investors are looking for a strong balance sheet and earnings visibility. Invensys doesn't fit into that category, said James Stettler, electrical engineering analyst at Dresdner Kleinwort Wasserstein.
British Telecommunications fell 5.3 percent to 378p after the UK's telecommunications regulator Oftel said it would open directory services in the UK to competition, ending BT's near-monopoly of the area.
Mobile phone giant Vodafone was an isolated telecoms gainer, adding 1.3 per cent to 141-1/2p as investors picked out value in the battered sector.
Media company Granada was another share to buck the trend, gaining 6.6 per cent to 97-3/4p after an upgrade by Goldman Sachs market outperform from market perform .
Heavily weighted banks did the most damage to the FTSE 100, taking 47 points off the index as sellers weighed up the likely impact on earnings from falling interest rates and the threat to loan books from the faltering world economy.
First-time results for HBOS created by the merger of Halifax and Bank of Scotland, were seen as lacklustre, while investors were prone to dwell on bad debt worries, knocking the shares 8.2 percent lower to 751-1/2p.
Dealers said the HBOS results were in line with expectations but the stock was being hurt by sector sentiment and worries over its exposure to the airline sector, badly hit by the U.S. attacks.
Elsewhere lost 3.7 percent and Barclays retreated 5.2 per cent.
Falling crude prices knocked Shell down 4.9 per cent and BP BP.L , 3.9 percent lower. Shell said on Wednesday it had cut its forecast for growth in oil and gas production to three percent a year from five percent.
Airlines went lower again, reflecting continuing concerns that passengers will stay away from air travel in large numbers following last week's attacks, which used jetliners as missiles against U.S. citizens.
British Airways fell 6.3 percent, while defence and aerospace group BAE Systems lost 9.7 percent and avionics maker Smiths Group fell 6.4 per cent after a bleak outlook from the world's biggest jet maker Boeing. Among the mid-caps, shares in Somerfield Plc dropped 25.2 per cent to 87-1/2p after the food retailer unveiled a slowdown in sales growth.
Shares in GWR Group owner of Britain's Classic FM radio station, fell more than 15 percent as investors again shunned the UK media sector, fretting about the outlook for shrivelling advertising revenues.
The FTSE 250 Mid-cap index closed down 85.3 points to 5,177.7, while the FTSE ALL Share index slid 2.5 percent to 2,272.2. The FTSE techMARK hit another life low, closing 36.1 points down at 1,163.3 after dipping to 1,161.6.
The FTSE at its closing level is nosing back towards three year lows around 4,600.
Strategists say investors are desperate for signs of economic recovery after the year's cuts in interest rates. But with no such glimmers of hope visible they are resigned to watching the year-long bear market continue as global tensions mount following last week's attacks on the United States.
Reuters
