Worst fall in stock market for over a year

UK stocks suffered their worst fall in more than a year yesterday as the benchmark FTSE 100 index tumbled 2.8 per cent amid a stock sell-off on both sides of the Atlantic and mounting fears the eurozone is about to slide back into recession.

The fall wiped £45.9bn off the blue-chip index, leaving it 181 points down at 6,211, more than 10 per cent below the near record highs of 6,904 the FTSE 100 hit in September.

However, New York shares staged a late bounce back, after falling more than 2.6 per cent in afternoon trade. The benchmark Dow Jones index, which at one point was off more than 460 points, ended the day down 173, or 1 per cent, at 16,141.

The rebound arrived too late to help European stocks though, with the FTSEurofirst 300 index of top European shares closing down more than 3 per cent at 1,252.83, its lowest since last December.

Oil prices also continued to slide, with Brent crude settling at a four-year low of $83.78 a barrel, down $1.26. It was trading above $115 a barrel as recently as June.

Investors headed for so-called safe-haven investments, such as US Treasuries, pushing the interest rate on the government bonds down to a two-year low of 2.043 per cent. Risky assets meanwhile soared, with the yield on Greek bonds hitting an eight-month high of 7.6 per cent amid concerns about recent opinion polls showing rising support for the anti-European Union Syriza party there.

The market turmoil prompted the challenger bank Aldermore to pull its £800m stock market flotation in London, even though it was still pushing ahead with the share sale as recently as Monday. However, its board and shareholders, mainly the US private-equity firm AnaCap, yesterday decided not to proceed.

Concern is mounting for other impending floats with the luxury shoe-maker Jimmy Choo next in the frame. It cut the likely share price range of its offer this week, valuing it at up to £700m. Sir Richard Branson’s Virgin Money and car auctioneer BCA Marketplace, which are planning £2bn and £1.2bn floats this month, will be watching the mood of markets closely.