Shares suffer biggest fall since September 11 2001

The FTSE 100 on Monday suffered its biggest one-day fall since the terrorist attacks on the World Trade Centre more than six years ago as fears about the prospects for the global economy took hold.

In a tumultuous session, the index fell as much as 5.6 per cent as dealers capitulated following sharp falls on Asian markets overnight.

This is just short of the 5.7 per cent fall at the close on September 11 2001. “The acrid smell of fear hangs over the City. I’ve never seen fear like this,” said David Buik at Cantor Index.

London’s benchmark index closed down 5.5 per cent at 5,578.2, a loss of 323 points and its lowest level since June 2006.

The slump had began in Asia as investors were left underwhelmed by US President George W. Bush’s package of measures aimed at stimulating the US economy. Hong Kong’s Hang Seng index tumbled 5.5 per cent overnight while the Nikkei 225 in Japan had closed down 3.9 per cent.

UK Daily View: Shares sink across the globe
Chris Brown Humes

Chris Brown Humes, markets editor, on the fear in the markets

After some sharp early falls, the FTSE 100’s slide accelerated as the morning wore on amid even more violent slides in Europe.

Both the Dax in Germany and the CAC-40 in France were down as much as 7 per cent - also the biggest falls since September 11 2001.

The slide in the CAC-40 took its fall to more than 20 per cent from its June high - the definition of a bear market. The Paris benchmark finished 6.9 per cent lower at 4,744.5.

US markets stayed closed for Martin Luther King Day, adding to the uncertainty.

As investors shunned risk, the European iTraxx Crossover index, a closely watched measure of risk appetite, continued its rise into uncharted territory, jumping 33 basis points to 480 basis points. This means it costs €480,000 annually to insure €10m of mostly junk-rated corporate debt against default over five years.

Martin Slaney, at GFT Global Markets, said: “A gloomy concoction of poor economic and corporate news plus a growing acceptance that the sub-prime fall-out has much further to go has created the highly distressed conditions for a global sell-off in equities.“

"The latest rumour is that the Bank of China may write off as much as $1bn in sub-prime related losses have added to the negativity," he added.

Simon Denham, strategist at Capital Spreads, said: "The more you look at the long term charts, the more they appear to show a 'double-top' formation from June and October last year and - if this is what the big investors are watching - then we could be in for some rather more serious falls ahead."

he slide in the FTSE 100 extended its run of negative sessions to five in a row, intensifying the index’s worst start to a year since its launch in 1983.

At its worst, the FTSE 100 closed about 70 points short of a 20 per cent decline from its July 2007 peak. A 20 per cent decline would take the index inside the technical definition of a bear market.

Life assurers, which own billions of pounds worth of equities, led the fallers. There were also fears about how the crisis among US bond insurers could hit the sector. Standard Life lost 3.9 per cent to 203½p, Old Mutual shed 8.5 per cent to 127.9p and Prudential dropped 3.9 per cent to 573½ p.

Friends Provident was the exception, up 3.6 per cent to 158p, after JC Flowers took a 2.7 per cent stake in the life assurer. The US hedge fund said it would approach Friends Provident’s board “with a view to developing a proposal that will deliver value for Friends Provident’s shareholders,” although it said there was no guarantee of an offer.

Mining stocks also slumped amid fears of weakening demand for raw materials. Rio Tinto lost 10 per cent to £42.28, Kazakhmys dropped 9.9 per cent to £10.41 and Vedanta Resources fell 8.1 per cent lower to £15.91.

Xstrata lost 5.5 per cent to £33.02 as Vale, the Brazilian mining giant, said that although it had held dialogue with the Anglo-Swiss group, “the current conditions prevailing in the global financial markets may constrain the realisation of a major strategic move.”

Wolseley lost 3.7 per cent to 689½p as the supplier of plumbing and heating goods directly exposed to the troubled US housing market said trading profit fell 25 per cent and market conditions looked set to worsen.

Travel companies were also sharply lower, with Tui Travel off 8.3 per cent to 206.3p and Thomas Cook 5 per cent weaker at 220.9p.

Lower down the market, the FTSE 250 slumped 419½ points, or 4.3 per cent, to 9,260.6, its lowest level since August.

Northern Rock bucked the gloomy trend, soaring 46 per cent to 94.3p after the government backed a proposal to convert the stricken bank’s public loans of more than £25bn into bonds in a move that may make a private sale of the company more likely.

Copyright The Financial Times Limited 2008

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[=1]Shares suffer biggest fall since September 11 2001[/url]

The FTSE 100 on Monday suffered its biggest one-day fall since the terrorist attacks on the World Trade Centre more than six years ago as fears about the prospects for the global economy took hold.

In a tumultuous session, the index fell as much as 5.6 per cent as dealers capitulated following sharp falls on Asian markets overnight.

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Looks like another good time to buy some more shares. Mr. Buffett's favorite buy time is when panic disrupts the upward march of prices, and I am one who thinks his success it ample credentials.

My buy and hold period is as near forever as I can make it, too!

It looks like the party's over for those with heavy international exposure.

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I guess Bushes capital gains tax cuts won't be needed if the rich don't have any capital gains.

I guess Bushes capital gains tax cuts won't be needed if the rich don't have any capital gains.

Are you Pauly-poo Zimmerman? Where have you been man? You sort of left when the economy rebounded (unemployment down, markets up, productivity way up) after the tax-cuts had time to work. Have you come back to gloat over this temporary correction? Wait 6-12 months then come back and see if your comment has any relevance.

The best thing about 12 months from now is that your buddy Bush will be history.

I bet you don't blame him in any way for the mess going on right now.? His let the rich do anything they want thinking is likely to blame in part for the current mess. Bush is the one presiding over the situation. He might want things to get bad so he can justify more tax cuts for his wealthy friends.

I can not see into the future, but I would predict that the next months are going to be rocky. I have no debts so I will ride things out whatever happens. It will be fun to watch though.

The best thing about 12 months from now is that your buddy Bush will be history.

I bet you don't blame him in any way for the mess going on right now.? His let the rich do anything they want thinking is likely to blame in part for the current mess. Bush is the one presiding over the situation. He might want things to get bad so he can justify more tax cuts for his wealthy friends.

I can not see into the future, but I would predict that the next months are going to be rocky. I have no debts so I will ride things out whatever happens. It will be fun to watch though.

The "dot-com" debacle was Clinton's fault and WWII was Roosevelt's fault. Right? Weren't they the ones "presiding over the situation"?

See, that is where I disagree with you. Even though Bush is not the best President we've ever had, blaming him for everything that goes wrong just points out that you are not basing your opinion on facts, but on your strong hatred of the person. It's not Bush's fault that you stubbed your toe this morning. Just because something bad happens, you can't blame the president--but you do anyway because you don't like him. Tough. America voted him in office, twice, both times according to the Constitution, whether you liked it or not.

I don't think I blamed Bush for this mess. I just stated that his tax cuts won't be that necessary if there is nothing to tax. You are putting words in my mouth. But that is no surprise.

I don't think I blamed Bush for this mess. I just stated that his tax cuts won't be that necessary if there is nothing to tax. You are putting words in my mouth. But that is no surprise.

Sorry, your statement that you bet I "don't blame him in any way for the mess going on right now" sounded like you were indeed blaming Bush for the "mess". I apologise if I took that wrong. Perhaps it was your earlier statement that it was Bush who was "presiding over the situation".

As for putting words in your mouth, please show me where I have quoted you incorrectly. You, on the other hand, misquoted my dictionary definition of a "lie" in another thread.

The fall of the stock market is the inevitable consequence of the system. It's the way it is set up. Funny how people want to spend time pointing at this person or that and blaming them. It's capitalism itself that is at fault..individual leaders can only postpone or hasten the inevitable.

Even the best market analysis predict that the cut in US interest rates will only work as a temporary measure.

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