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FOOTSIE LOSES £92BN IN FALL TO 5-YEAR LOW

SHOCK: A broker reacts to the falling figures

Saturday October 11,2008

By Peter Cunliffe

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FINANCIAL stocks bore the brunt yesterday as the FTSE 100 suffered its third-biggest one-day percentage drop during a rout of international money markets.

Britain’s blue-chip index dived as panic gripped stock exchanges across Europe, Asia and the U.S., and the global financial crisis showed no signs of letting up.

Banks, insurers and investment companies were the worst hit as the FTSE 100 slid 8.8 per cent to close 381.7 points lower at 3932.1, the lowest since May 2003, and ending the worst week since 1987.

This wiped £92billion off the value of the Footsie, bringing the week’s loss to £250billion.

At one stage it slumped 466 points, rattled by massive falls on Wall Street where the Dow Jones crashed 697 points in the opening minutes. By 7pm it was down 534.12 points at 8045.07.

Germany’s Dax index fell 7 per cent and France’s CAC 40 nearly 8 per cent, in the wake of a near 10 per cent fall in Tokyo overnight, ending a 24 per cent fall in Japanese shares during the week.

Big British fallers included Royal Bank of Scotland, HBOS and Legal & General, while U.S. investment bank Morgan Stanley suffered one of the heaviest falls in New York, down more than a third.

Frantic trading was triggered by fear that the world economy was tipping over into a deep recession.

The heavy falls came despite this week’s concerted efforts by governments and central banks, including a surprise 0.5 per cent cut in interest rates by the Bank of England governor Mervyn King.

David Jones, chief strategist at IG Index, said: “If the sharp slide seen at the beginning of January was the market taking a peek into the abyss, then this week has seen us jump down both feet first. There is a real sense of despair.”

He added the next key level for the Footsie was 3300, where the market bottomed in February 2003.

General Motors shrugged off reports it risked going bust, saying bankruptcy was not an option. It was grappling with “unprecedented challenges related to uncertainty in the financial market”.

Peter Fanconi, head of Swiss-based investor Harcourt, said: “We are encountering a washout where investors are doing fire sales. It’s a signal we’re reaching the bottom.”