Footsie fall is worst since Black Monday

Oct 11 2008 by Tony McDonough, Liverpool Daily Post

STOCK markets around the world suffered sharp falls again yesterday as London’s FTSE 100 Index endured its worst week since the Black Monday crash of 1987.

Fears of a recession and continuing worries over the stability of the banking sector were cited as reasons for the frantic selling among investors with the Footsie eventually finishing below the 4,000 mark at 3932.1 – its lowest close for more than five years.

The index has plunged 21% over the week – wiping more than £250bn off the value of top-flight stocks in the process.

The 21% fall comes close to the 22% slide seen by London's leading shares in the aftermath of Black Monday.

Following heavy overnight declines in Asia, screens turned red in the City as the London market approached falls of 10% in early trading. A dire start to US trading offered no respite.

The Dow Jones Industrial Average, which fell more than 7% on Thursday, tumbled as much as 8% during a volatile early session.

Wall Street capped its worst week ever with a session that left stocks with a widely mixed finish.

Last-minute buying helped curb steep losses and gave the market its best showing of the week as investors snapped up bargains among stocks devastated by seven days of massive losses.

The Nasdaq finished with a modest gain, while the Dow Jones lost 128 points.

City watchers were confounded by the falls ahead of crisis talks among the G7 finance ministers this weekend. David Jones, chief market strategist at IG Index, called it “another ugly day”.

“There is a real sense of despair – it is difficult to see what can be done to effect a handbrake turn in sentiment,” he said.

CMC Markets’ James Hughes added: “It is just utter panic.”

Across Europe, France’s CAC 40 and Germany’s Dax were also showing losses of 7% and 8% respectively.

In London, banking stocks were among the biggest victims of the turmoil as speculation mounted over the billions the sector may need to strengthen it’s finances.

Royal Bank of Scotland lost 25% and is down a mammoth 61% this week, and Halifax Bank of Scotland fell 19% yesterday and 37% over the week.

Neil Blankstone, of Liverpool stockbrokers Blankstone Sington, last night told LDP Business he believed the fear of recession was not necessarily the main factor.

“This is certainly not a panic sell-off per se,” he said.

“What has happened is that hedge funds and other investors whose investments are heavily geared (laden with debt) have needed to raise liquidity and so have been dumping their stocks into the cash market.

“Also the markets are supported by non-fundamentals – things like profitability of companies – and at the moment no one is able to accurately forecast very far into the future.

“There are fears of a recession but you have to remember that those fears have been with us for quite some time.”

TUNE into this Sunday’s LDPBusinessWeek for the latest news and analysis on last week’s dramatic events in the financial markets. LDPBusiness Week, presented by Daily Post business editor Bill Gleeson, can heard at 11am on CityTalk 105.9 and on digital radio.

tonymcdonough