Extractive firms lead UK slump as Shanghai slides - London Report

THE FTSE 100 slumped 4.7 per cent yesterday to its lowest level in almost three years, with all stocks but one in the red and miners leading the slide on growing fears of a China- led global economic slowdown.

The blue-chip index was down 288.78 points at 5,898.87, the worst close since late 2012. The gauge, which marked its biggest weekly loss of the year last week, has now fallen for 10 sessions in a row, the longest losing streak since 2003.

Alarm bells rang across world markets, after an 8.5 per cent dive in Chinese shares and a sharp drop in the dollar and major commodities panicked investors. In the US, the Dow Jones Industrial Average crashed more than 1,000 points in early trading before paring its losses to 588.4 points.

Traders said investors were effectively being forced to sell to raise cash after widespread losses across markets and that the chain reaction had yet to reach its end.

“There is a snowball effect happening, with margin calls putting pressure on positions and creating forced sellers,” said Mark Ward, head of execution trading at Sanlam Securities. “Every order has been a sell today, across the board, so clearly people think we haven't hit the bottom yet.”

However, other traders countered that stock markets were in “oversold” territory and that investors should bet on a rally.

Yesterday’s bloodbath in London wiped a combined £72bn off the value of companies in the FTSE 100.

The mining sector led the fallers, dropping nine per cent to its lowest level since 2009 as fears about China’s economic slowdown continued to bludgeon commodity prices. Glencore was the worst FTSE 100 performer, crashing 13 per cent to 137.9p, a fresh all-time low, while Anglo American slumped 9.9 per cent to 660.2p.

Oil stocks were also hit, with BP down 7.3 per cent, Premier Oil 14 per cent lower and Tullow Oil 10.4 per cent weaker.

RSA Insurance was the only member of the FTSE 100 to close higher, rising 0.75 per cent to 495p on speculation Zurich may still emerge with an offer to buy the company. RSA has been holding out for as much as 600p a share.

Outside of the benchmark, small cap UTV Media was one of the few stocks to outperform, rising almost two per cent after saying it was in talks to sell its television assets.