Trading screens across the City turned red yesterday as blue-chip stocks took a fresh pounding on global recession fears.
Crude oil tumbled below 50 US dollars a barrel while lower metal prices also hit miners, offsetting gains for beleaguered banking stocks.
The FTSE 100 Index closed 130.69 points down at 3874.99, the lowest since the financial turmoil of mid-Octobe
r, following a five per cent dive on Wednesday.
Sentiment was hit by further big falls on Wall Street early on as investors were caught off-guard by a worse than expected jump in unemployment claimants to a 16-year high.
Insurers and miners took the brunt of London's fall in a difficult session.
Traders said insurers had been hit hard by the big sell-offs of their counterparts in the US, adding to general concerns over their capital strength in struggling equity markets.
The fallers board was topped by Aviva, which dropped 20 per cent or 59p to 2923/4p.
Other double-digit losses were nursed by Legal & General, which shed 93/8p to 601/4p and Prudential, off 48p to 246p.
Falling aluminium and copper prices meanwhile dented heavyweight miners, led by Eurasian Natural Resources – off 321/4p at 1913/8p – and Vedanta Resources, slipping 501/4p to 3873/4p.
Crude oil also hit the lowest level for nearly two years, sinking below 50 dollars a barrel at one point as the slowdown fears lingered.
With crude at little more than a third of July's record, BP shed 24p to 464p and Royal Dutch Shell lost 100p to 1486p.
Among the risers, many banking stocks recovered ground after a difficult previous session. Royal Bank of Scotland gained 33/4p to 46p on the day investors approved a £20bn Government-backed bail-out scheme by an overwhelming margin
HBOS was the leading Footsie riser with a gain of 73/4p to 72p a day after investors in Lloyds TSB – up 63/4p to 1251/4p – approved a rescue takeover of the bank.
Barclays however proved the exception, dropping 17/8p to stand at 1273/4p after SocGen brokers lowered their price target on the stock.
Marks & Spencer was a notable riser as the retail sector recovered after falling heavily on Wednesday in the wake of more broker downgrades.
As M&S cut prices in a one-day 20 per cent off sale, shares rose three per cent or 61/2p to 2061/2p. Sentiment was also helped by better-than-expected figures showing a 0.1 per cent drop in sales volumes for October.
Fashion chain Next cheered 40p to 970p, B&Q owner Kingfisher rose 31/4p to 1027/8p and Debenhams, which is also cutting prices this week, rose 11/2p to 251/4p – a gain of six per cent.
Car parts business Halfords also gained seven per cent or 171/4p to 2401/2p after half-year profits came in ahead of forecasts.
The biggest Footsie risers were HBOS up 73/4p at 72p, RBS ahead 33/4p at 46p, Lloyds TSB advanced 63/4p to 1251/4p and Next 40p higher at 970p.
The biggest fallers were Aviva off 59p at 2923/4p, Prudential slipping 48p to 246p, ENR fell 321/4p to 1913/8p and Legal & General which ended the day 93/8p lower at 601/4p.
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