Global economic recovery fears drag City into the red

Investors shied away from riskier assets amid worries over faltering growth in China and a far worse than expected plunge in United States consumer confidence during June.

The Footsie eventually finished 157.46 points lower at 4914.22, down by 3.1 per cent, its lowest close since last September – with every single blue-chip stock in the red.

Wall Street's Dow Jones Industrial Average was down more than two per cent in early trading, while the Dax in Germany and France's Cac 40 both fell more than three per cent.

The effect of European austerity plans on economic growth added to the negative mix, while looming repayments of European Central Bank loans also led to fresh fears over liquidity pressures in the banking sector.

The euro fell to a new 19-month low against the pound of almost 1.24, while sterling also touched 1.51 against the dollar at one stage.

Mining firms were hardest hit by the share sell-off, with Rio Tinto down 208p to 3048p – more than six per cent – as metal prices slipped. Meanwhile, under-pressure BP's shares were back near last week's 14-year low after dropping 5.35p to 302.9p.

Royal Dutch Shell dropped 53p to 16381/2p.

Barclays was also among the leading top-flight fallers with a six per cent, or 18p, slide to 267.35p as the stock continued to suffer following Monday's rating downgrade from Nomura.

In corporate news, shares in Carpetright fell by more than 10 per cent, down 70p to 640p, after its full-year results came in slightly below market expectations.

The floor covering specialist posted a 64 per cent rise in profits but reiterated warnings over the somewhat uncertain consumer spending outlook.

The biggest fall in the FTSE 250 Index was again posted by Connaught as investors continued to dump shares in the social housing firm after Friday's warning that the emergency Budget would hit revenues and profits. Shares, which were at 325p last week, tumbled another 27.8p to 107.2p or 21 per cent.

Meanwhile, fresh takeover developments drove a further rise in shares in power protection specialist Chloride, which climbed 11 per cent, or 38.6p, to 387.1p.

The latest rally for the FTSE 250 company came after United States firm Emerson trumped an earlier agreed deal between Chloride and Zurich-based ABB by offering 375p a share, equivalent to 997m.

It means shareholders that have remained on board since the start of the year have been rewarded with a doubling in the company's share price.

Emerson chairman David Farr said: "The geographic reach and offerings of Emerson and Chloride are highly complementary and highlight the strategic importance of the transaction."

Emerson, which employs 130,000 people, expects that Chloride will form the basis of its European uninterruptable power supply growth strategy.

Chloride, which helps firms to protect themselves against power cuts, employs 2,300 people in 15 countries.

Comet electricals chain Kesa was another strong riser early on after activist investor Knight Vinke increased its stake in the retailer to three per cent.

The interest in Kesa has fuelled speculation that Knight Vinke may push for a break-up of the company, although shares lost initial gains to stand 2.4p down at 120p.

The biggest Footsie fallers were Rio Tinto down 208p at 3048p, Barclays down 18p at 267.35p and Xstrata off 58.7p at 908.7p.