FTSE 100 in biggest fall since 2008

London's leading shares index saw its biggest fall in nearly three years today as panic over the state of the global economy took hold.

The FTSE 100 Index closed 4.7% or 246.8 points lower at 5041.6 - wiping £64 billion from the value of Britain's biggest companies.



The slump - the biggest points fall since November 2008 - came after America's central bank delivered a gloomy view of the economy and failed to inspire traders with its latest emergency measures, which included a process dubbed Operation Twist.



The US Federal Reserve's warning that there were "significant" risks to the world's biggest economy was joined by disappointing manufacturing figures from Asian powerhouse China and the eurozone.



Meanwhile, Britain joined forces with five other G20 countries to call for decisive and co-ordinated action from the world's leading nations to help the global economy recover from recession.









Ben Critchley, sales trader at IG Index, said: "Last night's gloomy outlook from the Fed saw market sentiment take a battering right from the open, while disappointing figures from China have done little to lighten the mood."



Operation Twist, designed to keep US interest rates lower for longer, disappointed markets, which had surged in recent days on hopes that the Fed might embark on a third package of quantitative easing.



The Dax in Germany dropped 5% while France's CAC-40 fell 5.3% as a similarly shocking performance unfolded on Wall Street, where the Dow Jones Industrial Average was 3.6% lower.



Oil prices tumbled on global growth fears, with Brent crude in London dropping nearly 3% to 105.71 US dollars a barrel and light crude on the New York Mercantile Exchange off 5.4% to 81.22 US dollars a barrel.



The grim outlook from the Fed - which pointed to weakness in the US labour and housing market - was the latest shock to already volatile global markets, most recently shaken by financial uncertainty in Greece, which is verging on a debt default.



As the markets slumped, Prime Minister David Cameron put his name to a letter calling for swift action to resolve the eurozone debt crisis and to put America's public finances on a sustainable path.



Elsewhere, managing director of the International Monetary Fund (IMF) Christine Lagarde urged nations to work together to meet the growing risks.



Miners and bankers were the biggest losers amid growing fears for the health of the global economy after the IMF earlier this week warned that the world was entering a dangerous phase.



Fears of a slump in demand for mineral resources saw declines for Vedanta Resources, Kazakhmys and Antofagasta which all lost nearly 13% of their value.



Weak sentiment towards the banking sector was aggravated yesterday when agency Moody's downgraded credit ratings for three major US banks - Bank of America, Wells Fargo, and Citigroup.



Barclays was down 9%, Lloyds Banking Group was off 10% and Royal Bank of Scotland dropped 1%.



Some economists still expect the Fed to roll out so-called QE3 as early as November - which would boost asset prices around the globe by pumping more money into the financial system.



Operation Twist - which will see short-term government loans sold in favour of notes that expire over a longer period - was met with scepticism about whether it will be as effective. The last time such a tactic was adopted, in 1961, it only lowered rates by 0.15%.



Interest rates in the US are already at a record low yet the economy is still struggling to grow.



Clem Chambers, chief executive of European stocks and market website ADVFN, said today had been a perfect storm for a market slump.



He said: "The markets may bounce back, but unless the governments of Europe find a solution fast the FTSE will find itself heading quickly towards 4500, on its way to 4000 and perhaps beyond.

PA

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Reimagined: Gwyneth Paltrow and Toni Collette in the film adaptation of Jane Austen's Emma
books
Arts and Entertainment
Jesuthasan Antonythasan as Dheepan
Cannes 2015Dheepan, film review
Sport
sport
News
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Arts and Entertainment
The pair in their heyday in 1967
music
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine