Banks slump as service sector data disappoints

Stocks have retreated this morning after a poor overnight session in Asia and over intensifying concerns that economies worldwide face recession.

London's FTSE 100 has been hit by a barrage of fears over global growth since US employment data on Friday showed job creation slumped to zero in August.

Service sector data from China has shown a slowdown in growth that has fuelled fears that the economic powerhouse may be cooling.

Asia's Nikkei closed down 1.9 per cent while the Hang Seng lost almost three per cent.

Eurozone service sector Purchasing Managers' Indices survey today also show slowing growth and data provider Markit warned the region's economy could contract by the fourth quarter if nothing changes.

The UK's service sector has also performed worse than expected, posting its worst fall since 2001 with a grim outlook.

Economists at Ernst & Young have warned that plans to ring-fence banks' retail arms could cut up to 0.3 per cent from UK GDP if implemented.

Bank shares are sharply down, led by RBS, which has slumped 6.2 per cent.

Barclays has dived by 5.6 per cent while Lloyds is four per cent lower.

Mining stocks are also being sold over fears that a stalled global economy will cut demand for raw materials.

ENRC is down 3.6 per cent and Kazakhmys is off by 3.5 per cent, while Antofagasta and Xstrata are each down 3.2 per cent.

Rio Tinto is down 2.9 per cent despite announcing plans to sell off the low-yield Palabora copper mine.

Oil giant BP is one of just two blue-chips to rise. It is up 0.7 per cent as it bounces back from falls last week when US rival ExxonMobil signed the arctic exploration deal with Rosneft it had pioneered.

Gold miner Randgold Resources is also up 0.3 per cent as investors seek out the safe haven metal.

All eyes will be on the Eurozone today as it is a public holiday in the US for Labour Day.