FTSE slides into bear market

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The Independent Online

London's FTSE 100 Index slid into "bear market" territory today as fears continued to mount over the health of the UK economy.





The 2 per cent decline for the Footsie came after a sell-off last night on Wall Street put pressure on markets worldwide. But investors in London were also faced with a raft of other bad news, including a warning from the British Chambers of Commerce (BCC) that the UK was "at serious risk" of recession.



The BCC's economic adviser David Kern said its latest snapshot of the UK economy showed a "menacing deterioration" in prospects.



For a while there were no blue-chip stocks in positive territory as the Footsie's decline below the 5400 mark put London into a bear market, as defined by a 20 per cent fall from the high point seen last year.



Speculation that two American mortgage providers might have to raise fresh capital and make further write-downs triggered the sell off on Wall Street and put fresh pressure on a host of financial stocks in the UK.



Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: "Today's fall marks a full entry into bear market territory, even though most investors will have been feeling that this has been here already for some months."



Mr Hunter said fears of additional credit writedowns by banks and the prospect of lower corporate earnings added to the negative sentiment.



"At this precise moment, it is difficult to identify from where a positive catalyst might emerge," he added.



Housebuilder Persimmon and estate agency Savills contributed to the gloom today by reporting sharply lower transaction levels and selling prices. Savills said the downturn had started to impact on the market for prime country property.



At the same time, oil rebounded in Asian trading on a weaker dollar and renewed buying interest after prices plunged nearly four US dollars a barrel in the previous session.



Paul Webb, chief dealer at CMC Markets, said: "Credit woes across the Atlantic remain very much at the heart of traders' concerns whilst the fact crude prices have refused to push below $140 a barrel is also clearly a worry."



Homeowners are unlikely to get much relief from the Bank of England later this week. Fears over rising inflation mean the Bank is expected to keep the cost of borrowing at 5 per cent, despite the boost a cut would give the economy.



Manoj Ladwa, a senior trader at TradIndex, said: "In normal circumstances, the case for the Bank of England to cut rates this Thursday at its regular monthly meeting would be cut and dried.



"But the price of oil and food means that the threat of inflation remains severe, and most analysts expect rates to remain unchanged."

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