Market Report: FTSE shows 'no one is out of the woods yet'

So the global rally proved to be short-lived, and recession fears have returned to haunt the City. The American market fell overnight and London was dragged along in its wake, with few stocks escaping the carnage at the end of the day.

Nick Brown, a sales trader at the brokerage Xconnect, said: "The rises earlier this week were great, but Wednesday's trading reminded us that no one is out of the woods yet."

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The FTSE 100 was weak in the morning, then spiralled wildly downwards, losing 7.16 per cent at the close, to 4,079.59. It was crushed by a shocking performance from the miners as metal prices fell once more.

Rio Tinto compounded the problems, warning of weakening demand from China, saying that it had been forced to shelve its $15bn asset sale and there were issues at its Escondia mine in Chile. It closed down 16.6 per cent to 2,357p. Investors locked in losses as the sector contributed eight of the nine biggest losers. The lowest on the day was Eurasian Natural Resources Corporation, which gave up a quarter of its value to close at 386.5p.

International Power was not looking too sparky either after it was forced to shut down a plant in Sicily. The plant looks like it will be offline until the end of the year after it was damaged by fire, yet some analysts thought the investor reaction was over the top. It still shed 12.41 per cent to close at 236.5p.

The black horse was back yesterday, albeit briefly. Lloyds TSB topped the leaderboard as the standout pick of the banks, rising in the morning by more than 6 per cent. It rose after The Independent story that the government was considering allowing the bank to pay dividends, despite it taking advantage of the £37bn bailout. During the slaughter in the afternoon, it lost 1.1 per cent to close at 150.2p; only HBOS bobbed into positive territory, up 0.47 per cent to 85.7p, one of two on the day.

Some suffered more than others, with Standard Chartered the worst. The Asia-focused group slumped 13.65 per cent to 1,145p after Exane BNP Paribas slashed its rating to "underperform" from "neutral". Other financial stocks from asset managers to life insurers were feeling the pain yesterday. Old Mutual was the worst, down 18.11 per cent to 63.3p.

The technology group Autonomy Corporation found favour early on with numbers that beat expectations. The company is in a prime position to profit from banks' despair as it makes technology to deal with the slew of regulation set to hit the US and Europe. It failed to hold its gains and closed at 808.5p, down 1.16 per cent.

Another group to post strong results but couldn't fight the macro environment turning on the market: the publisher of the Pink 'Un, Pearson, saw sales grow 8 per cent, while operating profit was up 11 per cent. A bullish outlook that expects full-year earnings at the top of current market estimates and backing from Numis sent the shares up, before settling 8p down at 551p.

Miners dominated the fallers on the second tier as well, with Talvivaara Mining the worst, down almost a quarter to 161.75p, while the international ferro metals group Aricom was close behind, 23.64 down at 10.5p. Industrial machinery group Charter also suffered as Panmure Gordon cut the stock from a "buy" to a "hold" based on what it called the "double-whammy of volume and price declines".

On the upside, BlueBay Asset Management was among the risers after support from Citigroup. The asset management group posted a gain of 5.5 per cent to 182.25p, despite assets under management falling 2.3 per cent to $20.5bn as the market conditions bit. Hugh Willis, the chief executive, predicted that the market would turn before the end of the financial year, and the stock rose as analysts said they were impressed by the inflows over the past quarter.

Top by far was Sports Direct International, which benefited from the read across from positive news in JJB. It rose 5p, 14.7 per cent, to 39p, despite a target cut from Panmure to as low as 30p. One trader said: "It's a prime next target as it doesn't look expensive. There will also be a bit of short covering; it is a self-perpetuating process."

JJB has endured a tough October, but it was very much in focus after receiving an approach for its Qube and Original Shoe Company operations yesterday. While the group revealed neither the bidder nor the price, it leapt 24.47 per cent to 29.25p. Both divisions have reported losses since they were bought in the past year – the former from Mike Ashley, the latter from Sir Tom Hunter.

Among the fallers, Woolworths Group gave up 14.43 per cent, or 0.7p, to 4.15p over rumours of departures and fears over the group's performance in the run-up to Christmas.