Market Update: FTSE 100 deep in the red

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The FTSE 100 was deep in the red this morning, falling by 2.38 per cent or 95.69 points to 3923.15 at around 11:10 am, as traders took stock of overnight losses on Wall Street, where the benchmark Dow Jones Industrial Average retreated to its lowest level since late 2002 in the final hour of trading.

The sharp declines –which saw American bank shares slump to near 17-year lows amid worries about the effectiveness of the Obama stimulus package –depressed sentiment across the London market, with traders highlighting concerns about “a new bottom” as the global economic storm gathers pace.

Until this week, the Footsie – which is on track to register one of its worst weeks on record – kept clear of the psychologically important 4000 point-mark, with buyers piling in every time the index threatened to fall further. But given the losses in America last night, traders said we might see a new floor for UK equities at around the 3, 800-3, 900 level.

“Things are definitely starting to look grim,” said Simon Denham, managing director of City spread better Capital Spreads,

“With banking stocks in the States now at such reduced levels that there is little point selling them lower unless bankruptcy or nationalisation is in view, the game will now turn to other sectors.”

Moving up

There was woefully little activity on the upside, with only three stocks managing to record gains on the FTSE 100.

Prudential was strongest, surging to 281.25p, up 9.6 per cent or 24.75p, after the insurer reassured the market on its capital position. The company also posted full year sales figures, which came in slightly ahead of consensus.

BAE Systems, up 2.75p at 402.75p, continued to draw steam from its results while the satellite group Inmarsat climbed to 406.75p, up 4p.

Moving down

The uncertain economic outlook prompted further falls in metals prices, which depressed the heavily-weighted mining sector. Anglo American was the weakest, losing just over 13 per cent or 161p to 1075p after the company scrapped its final dividend in a bid to conserve cash as it deals with the slowdown in the world demand for commodities. Anglo also announced plans to shed 9, 000 jobs as profits slide.

Rio Tinto, which remains mired in controversy over its recent fundraising agreement with China’s Chinalco, was 6.4 per cent or 128p behind at 1872p, while Xstrata fell to 670p, down 6.8 per cent or 49.5p.