19 Aug 2011

Global market falls continue

Another 3 per cent was wiped off London’s leading shares today as more heavy losses for banking stocks pushed the FTSE 100 Index below the 5000 barrier.

A trader reacts at her desk at the Frankfurt stock exchange (Reuters)

The fall follows Thursday’s loss of £62bn from the index in its worst session since the financial crisis in 2008.

The latest decline reflected continuing panic over the global economic slowdown and fears of a funding crisis in the European banking system.

The FTSE 100 Index fell another 153.7 points to 4939.6. Banking stocks were at a two-year low with Lloyds Banking Group down 8 per cent or 2.5p at 27.3p, Barclays fell 9.4p at 144.7p and Royal Bank of Scotland 1.45p lower at 20.5p.

The biggest fall in the top flight was Aberdeen-based oil services firm Wood after it was the subject of a downgrade by broker JP Morgan Cazenove. Shares were 9 per cent lower, down 48.1p to 478.45p.

“But now we are in a kind of loop of doom where stock price bungee-jumping is impacting upon business and consumer confidence which could then beget actual economic damage. And on top of that we have the old questions about what weapons are left to fire.”
Faisal Islam blogs on the what’s spooking the markets and what can be done to curb the panic

The only ray of light for investors came from the technology sector after last night’s announcement that Hewlett-Packard planned to buy software firm Autonomy in a £7.1bn deal.

Autonomy shares jumped 75 per cent or 1075.5p to 2504.5p, while the latest consolidation moves prompted chip designer Arm Holdings to rise by 12.7p to 491.1.5p and software firm Misys by 11.65p to 246.35p.

UK borrowing down

Meanwhile there was a welcome piece of good news for the markets as the UK Government saw a marked drop in its borrowing last month after it started to account for its levy on banks’ balance sheets.

Public sector net borrowing, excluding financial interventions such as bank bailouts, was £20m, compared to £3.5bn in the same month a year ago, the Office for National Statistics said.

This was substantially lower than the £2.5bn expected by the City. The levy on banks’ balance sheets contributed some £660m in the month while public finances were also boosted by larger corporation tax receipts, VAT and lower spending by local government in part however due to budget cuts and redundancies.