Wall Street had enjoyed its best election day session since 1984 on Tuesday, but the Dow Jones Industrial Average fell almost two per cent in early trading.

European markets – where Obama's success was priced in earlier this week – also declined. In London, the Footsie slipped more than two per cent or 108.77 points to stand at 4530.73.

The scale of the task ahead for the president-elect dimmed the feel-good factor following the latest round of poor economic data on both sides of the Atlantic.

In the UK, the fastest contraction of the country's powerhouse service sector in 12 years reinforced expectations that the Bank of England will announce an aggressive cut in interest rates of as much as one per cent today.

Leading the fallers were mining stocks as Morgan Stanley slashed targets on a raft of firms due to concerns over weak metals demand.

Eurasian Natural Resources was the leading blue-chip casualty, down 49p to 359p, or 12 per cent.

It was closely followed by stablemate Kazakhmys, which slipped 43p to 3541/4p, while Vedanta Resources declined by 911/2p to 908p.

Heading in the opposite direction was transport firm FirstGroup after half-year profits jumped 44 per cent to £107.1m, marginally ahead of City expectations. Shares were up 141/2p to 4593/4p, while the soothing of investor fears about the impact of the recession on the public transport sector caused Stagecoach to improve 97/8p to 1933/4p.

In the retail sector, Next shares recovered from a weak start to stand almost six per cent or 64p higher at 1189p. Analysts said a third quarter retail sales drop of 4.4 per cent was much better than expected, although this was accompanied by a warning that Next expected another drop in sales in 2009.

Marks & Spencer, which rose sharply after results on Tuesday, was up by another 61/4p to 2443/4p – or three per cent – as the hopes for a sharp cut in interest rates offset concerns about the company's performance in comparison to Next and Primark.

But Primark owner Associated British Foods, which also posted impressive figures on Tuesday, failed to find favour with investors as shares slipped 11/2p lower to 6961/2p.

The leading Footsie riser was Royal Bank of Scotland, up almost six per cent or 33/4p to 69p as the firm announced plans for a bond issue, which will be guaranteed by the Government.

Outside the top flight, shares in building firm Rok tumbled after it said projects worth more than £150m had been shelved or cancelled by clients following the banking crisis. It expects profits to be £12m lower than expected. The stock finished a torrid session down by 381/2p to 351/4p.

The biggest Footsie risers were RBS, up by 33/4p at 69p, Next was ahead by 64p at 1189p, Barclays added 10p to 1957/8p, while Stagecoach ended the day 97/8p ahead at 1933/4p.

The biggest fallers were ENR, down by 49p to 359p, Kazakhmys, which fell 43p to 3541/4p, Wood Group was down 29p at 253p and Vedanta Resources fell 911/2p to 908p.