Cut spooks market into 6% dive

The London market dived almost 6 per cent today in the wake of the Bank of England's shock 1.5 per cent interest rate cut.

The drastic move stunned stock markets and wiped more than £62.3 billion from the FTSE 100 Index as it brought home the growing prospect of a prolonged recession.

Downbeat retail sales and employment figures from the US added to the gloom, leaving the top-flight index 258.3 points lower at 4272.4 by the close.

Businesses cheered the Bank's decision, but the market reaction suggested attentions had now returned to the state of the UK economy.

CMC Markets trader Jimmy Yates said: "The fact the BoE jumped in with a huge 150 basis point cut certainly gave the market a wake-up call."

High street giant Marks & Spencer was one of a handful of blue-chip stocks in positive territory amid hopes the cut could tempt consumers back into the shops.

M&S was the Footsie's leading riser, up 8p to 252.75, or 3 per cent. In the FTSE 250, rival Debenhams - which has significant debt - initially soared 13 per cent but gave back the gains to stand 1.75p lower at 35p.

Elsewhere in the top-flight however trading screens turned red. Hedge fund Man Group was the biggest casualty after it revealed the global financial turmoil had knocked nearly a quarter off interim profits and left assets under management lower than forecast.

Shares in the group plunged 31 per cent or 122.25p to 270p.

Investors also dumped commodities stocks on the latest recession concerns, with mining firms littering the fallers' board. Eurasian Natural Resources was the biggest casualty, off 69.25p at 289.75p.

Meanwhile crude oil shed four dollars to 61 dollars a barrel, leaving BP 30p lower at 493p and Royal Dutch Shell 125p lower at 1647p.

Banks remained under pressure despite the rate boost, with a note from Credit Suisse still weighing heavy on sentiment after it said trading for UK banks was deteriorating at a faster than expected pace.

It lowered its target price for Lloyds Bank Group, which includes HBOS, and warned Royal Bank of Scotland could make a loss in 2009 as well as this year.

Lloyds TSB slumped 10 per cent or 21.15p to 187.6p and HBOS fell 10.25p to 103.5p, while Royal Bank of Scotland was down 5p at 64p, a fall of 8 per cent.

In the FTSE 250, former blue-chip stock Tate & Lyle rose 4 per cent after it posted stronger-than-expected first-half profits and said it was "well-placed" to cope with a slowing global economy. Shares were 12p higher at 381.75p.

A housebuilding bounce-back in the second tier on hopes of some respite for falling property prices was led by Persimmon, up 14p to 336.75p, and Barratt Developments, which gained 1.5p to 85p.

The biggest Footsie risers were M&S up 8p at 252.75p, Old Mutual ahead 1.7p at 55.3p, International Power up 7.25p at 263.5p and Cobham ahead 3.9p at 192.9p.

The biggest fallers were Man Group down 122.25p at 270p, ENR off 69.25p at 289.75p, Invensys down 29.5p at 138.1p and Rio Tinto off 442p at 2506p.