Stocks end on downer as gloom shared by all

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A TUMULTUOUS year for stock markets ended yesterday with the FTSE 100 Index down nearly six per cent in 2011 – but investors may be thankful the decline was not worse.

During a panic sell-off in August, when politicians were staring into the abyss due to the European debt crisis, the top flight index was 19 per cent lower and below the 5000 threshold.

But it finished for 2011 at 5572.3, down 327.7 points, or 5.6 per cent lower. City experts have forecast more fluctuations in 2012 and with the future of the eurozone still uncertain few have made firm predictions for next year.

The near six per cent fall for the FTSE 100 Index is in stark contrast to the nine per cent gain the previous year, reflecting gathering gloom over the world economy.

But the performance of the London market is significantly better than many in crisis-hit Europe, with the Dax in Germany about 15 per cent lower and the Cac-40 in France around 18 per cent lower. Asian markets have also suffered after Japan’s Nikkei closed at its lowest year-end level since 1982, having lost a fifth of its value following the devastating tsunami and nuclear crisis.

Meanwhile, China’s Shanghai Composite Index dropped by a similar amount.

In contrast, the Dow Jones Industrial Average is set to finish up about six per cent amid encouraging signs over the resilience of the US economy.

Fears about the world economy came to a head in August after the US suffered a credit rating downgrade and there were grim predictions that Spain and Italy would collapse under their respective debt mountains.

It resulted in successive falls of 100 points in a day for the FTSE 100 Index, including August’s record run of four triple-digit losses in a row.

The decline in the FTSE 100 Index is largely down to the poor performance of heavily weighted mining companies, which have been hit by declining commodity prices as global economic prospects darken.

Banks have also had a torrid year after being hit by fears over their exposure to European debt and the prospect of increased Government regulations, such as the forced split of their retail and investment arms.

Taxpayer-backed Lloyds and Royal Bank of Scotland were down 61 per cent and 49 per cent respectively.

In the FTSE 250 Index there were huge falls for Argos and Homebase owner Home Retail, which dropped 56 per cent, and PC World and Currys owner Dixons Retail which fell 57 per cent.

chris.bond@ypn.co.uk