FTSE continues downward spiral

Markets continued the downward spiral which saw £35bn wiped off London's blue-chips yesterday as the debt crisis and fears that the world economic recovery is not gaining traction took their toll.

There were few signs of life in markets across Europe this morning with the FTSE 100 slumping 2.8 per cent on opening.

Germany's Dax was 2.2 per cent lower while markets across Asia closed down after a bruising day in which investors' confidence was sapped.

Overall European markets today plunged to a 14-month low with no signs of the gloom lifting.

The European Central Bank moved yesterday to shore up the bond markets by offering reassuring words but its emergency intervention only served to trigger more panic.

Key US jobs data will be released later with investors looking for a crumb of comfort after a week littered with negative data suggesting the global economic recovery is hitting the buffers.

On the FTSE 100 this morning the banking sector led the market downwards.

RBS was down by ten per cent after reporting that it had plunged into the red, mainly due to its exposure in Greece.

It posted a pre-tax loss of £678m in the second quarter.

Barclays and Lloyds were both down by seven per cent their results this week have laid bare their weaknesses, particularly exposure to the Greek and Irish debt crisis, while payouts for pension mis-selling has also weighed on the sector.

Other big fallers were engineer Weir Group, down seven per cent, and Petrofac which dropped by four per cent.

Prudential fell one per cent despite reporting profits up by a quarter as it suffered from the generally bleak trading environment.

There were few risers of any note in the struggling market, although commodities giant Glencore put on three per cent. Satellite navigation company Inmarsat gained one per cent, recovering slightly after falls yesterday triggered by it lowering its growth forecasts.

In UK economic news factory gate prices rose at their fastest annual rate in nearly three years in July as input costs for oil and food continued to soar, official data showed.

Meanwhile figures from the Halifax showed that house prices rose in July by just 0.3 per cent, leaving them 2.6 per cent lower than a year ago with the average at £163,981.

But the US non-farms payroll data will dominate as its gives what is seen as an accurate snapshot of the US jobs market indicating whether the country is sliding back towards recession.