Global economic fears drag Footsie back into the mire

Disappointing economic data in the US capped a poor session for investor sentiment, which took a battering overnight amid signs of slowing growth in China.

The Footsie closed 111.12 points down at 4805.75, with hefty falls also in early trading on Wall Street as the Dow Jones Industrial Average sunk more than 90 points.

The pound strengthened against the dollar as weak US jobs, housing and manufacturing data slammed the greenback, at 1.51 dollars, although sterling fell to 1.21 euros as European funding concerns began to ease.

The US data yesterday added to concerns over the risk of a double-dip recession, although many analysts said a renewed downturn was unlikely as the production side of the economy continues to expand, though less briskly than earlier.

"None of the data is good for the bullish camp, which was expecting a V-shaped recovery for the rest of the year. These numbers suggest fatigue in the consumer sector," said Joseph Battipaglia, a market strategist at Stifel Nicolaus in Yardley, Pennsylvania.

Initial claims for state unemployment benefits increased 13,000 to 472,000, the Labor Department said, above market expectations for

452,000.

Yesterday's sharp slide for the Footsie marked an ominous start to third quarter trading after losing more than 13 per cent in the previous three months.

As well as the China and US concerns, a move by ratings agency Moody's to put Spain on review of a possible downgrade was also behind the sell-off.

And a closely watched gauge of UK manufacturing activity likewise gave some cause for concern that the bounce back from recession on these shores was faltering due to a eurozone blow to exports.

Financial and commodity stocks were suffering in London due to the growth concerns, with Barclays and Royal Bank of Scotland down 151/4p to 2553/8p and 2p to 391/2p respectively. Royal Dutch Shell was 77p lower to stand at 1554p after it said it would lose 32,000 barrels of oil a day in the Gulf of Mexico due to the shutdown prompted by Hurricane Alex.

Rival BP was one of only two blue chip stocks to gain ground as it continued to benefit from speculation of takeover interest from Exxon Mobil and hopes that Russian partner TNK-BP may snap up some of its assets to help free up cash to cover its soaring Gulf of Mexico liabilities. Shares in the battered blue chip added 9p to 328p, a gain of almost 3 per cent.

In the FTSE 250 Index, Tate & Lyle lifted after the industrial giant took the historic decision to sell its European sugar refining business, including its Golden Syrup factory in London, to American Sugar Refining for 211m.

With Tate now able to focus on higher margin businesses such as

supplying sweeteners, starches and ethanol, shares rose 43/4p to

4543/8p.

Department store chain Debenhams was also higher, up 21/8p to 551/8p, despite reporting a 0.4 per cent drop in like-for-like sales in the 42 weeks to June 19. Analysts said stronger margins and quicker than expected progress on a debt refinancing deal were behind the share price improvement.

Pubs and brewing firm Greene King was 23/4p better at 395p after very strong results and announcing plans to expand its Hungry Horse managed pubs business by more than 200 outlets.

The only Footsie risers were BP and Inmarsat up 1p to 7151/2p. Biggest fallers were Barclays and Investec down 243/8p to 4291/4p.