FTSE turmoil continues

Jul 10 2008

The UK’s leading share index shed more than 2% today as London’s week of stock market turmoil continued.

The FTSE 100 Index slipped to 5406.8 - its lowest close since November 2005 - amid falls for heavyweight banking and oil companies as gloom over economic prospects mount.

Meanwhile the Bank of England’s widely-expected decision to hold interest rates at 5% gave no relief to beleaguered retailers, who were also hit by downbeat comments from investment bank Goldman Sachs.

Today’s close leaves the Footsie just above the 20% decline from last year’s peak which would define an “official” bear market. The blue-chip index has swung wildly between gains and losses this week amid fragile market confidence.

David Jones, chief market strategist with IG Index, said: “It is difficult to come up with a different take on what we are seeing one day to the next. Rallies, when they happen, have proved to be strong - but ultimately short-lived.”

Concerns over the financial strength of mortgage companies in the US in the wake of the credit crunch have also weighed on Wall Street and affected financial stocks in the UK.

Today shares in Barclays shed almost 3%, while Royal Bank of Scotland and HSBC both slid more than 1%.

Oil prices falling below the 146 US dollars a barrel record seen last week despite political tensions over Iran have also hit Footsie heavyweights BP and Royal Dutch Shell, which both fell more than 2%.

On the high street, Goldman Sachs advised shareholders to sell stocks such as high-end retailer Burberry, H Samuel jeweller Signet and department store chain Debenhams as the squeeze on consumer spending tightens further.

Stocks including B&Q owner Kingfisher were also among the Footsie fallers today after analysts at Deutsche Bank predicted weaker DIY markets this year and next.

Meanwhile the Bank of England is holding off from the rate cuts which would offer aid to retailers due to its concerns over oil and food-driven inflation.

Paul Webb, chief dealer at CMC Markets, added: “There were absolutely no surprises in the Bank’s decision to leave its interest rates unchanged this month, although many businesses would have obviously welcomed a more dovish approach.”