Independent UK: Crash! Biggest fall in shares since September 11

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Crash! Biggest fall in shares since September 11
Recession fears wipe £84bn off the value of Britain's biggest companies as stock markets tumble across the globe
By Nick Clark

Published: 22 January 2008

It was the day that the fear factor took over. From Asia to South America, share prices tumbled yesterday as the world's investors gambled that a US recession was now inevitable. In London, the City endured its darkest day since the nadir of 9/11. What Alan Greenspan once called the "irrational exuberance" of traders gambling on rising asset values has gone. In its place, a deep-rooted pessimism has taken hold.

In a single session, a massive £84bn was wiped off the value of Britain's biggest companies, as the FTSE 100 index plummeted by 5.5 per cent, closing 323.5 points lower at 5578.2. Last week the index dipped beneath the 6,000 mark for the first time since the credit crunch began in August. It was the eighth consecutive day of losses. Since Christmas Eve, the FTSE has dropped by almost 1,000 points and last night analysts were predicting further falls.

While President George Bush has authorised an economic rescue package to address the US sub-prime crisis, market experts believe the plan has come too late. And no one believes the world's other major economies will remain unscathed as America plunges into an economic downturn. For the world's biggest companies, recession in an export market as vital as the US can only spell trouble.

One senior UK-based trader said: "The fear is palpable as investors are getting more worried about the prospect of a recession in the US. In the current climate any vaguely scary news is pummelling the market." Martin Slaney, head of derivatives at GFT Global Markets, said: "The punches just keep coming. Ambivalence over Bush's rescue plan for the US economy was the trigger of this rout, causing fears of an economic slowdown."

The gloom and alarm coursing through the City was repeated wherever shares and stocks were changing hands. Europe suffered, with Germany's Dax index off 7.16 per cent and France's CAC 40 down 6.83 per cent. In Asia, Japan's Nikkei 225, which closed before trading in London, fell 3.86 per cent to a two-year low. The Hang Seng in Hong Kong lost 5.5 per cent, and Australia's ASX 200, was down 2.9 per cent. It was the ASX's 11th consecutive negative day, the longest losing run for a quarter of a century. David Buik, a market expert from Cantor Index, said: "The world is now in a severe credit crisis. Banks all over the world have been indiscriminately lending money to consumers and business alike and they will have to pull in their horns, which will affect growth throughout the world." .......(more)

The complete piece is at: http://news.independent.co.uk/business/news/article3359065.ece