FTSE crashes to lowest level in 11 months on Euro turmoil

BRITAIN’S top share index tumbled and closed lower for the fifth consecutive trading day yesterday, depressed by global growth concerns and sovereign debt worries ahead of key US jobs data.

Inmarsat shares plunged 19.3 per cent, hitting their lowest level in more than two and a half years after the satellite operator abandoned growth forecasts for its core business.

But commodity and banking stocks were the main drag on London’s blue chip index, as investors fled from risk on worries the stalling global economic recovery would feed through to what has so far been mainly robust corporate performance.

“This economic recovery will be slower and more difficult because both nations and [some] consumers are overladen with debt,” said Louise Cooper, market analyst at BGC Partners.

“Repaying the loans will take longer and be more painful than we had previously anticipated. We are in a catch 22 situation, we desperately need growth to pay off the debt, but we cannot grow because of the amount of debt we owe.”

The FTSE 100 index plummeted 191.37 points, or 3.4 per cent, to 5,393.14, closing below 5,400 for the first time since 2 September 2010.

Investors bailed out of equities ahead of US non-farm payroll data today that will be scrutinised for signs of how quickly the US economy can regain its momentum.

New US claims for unemployment benefits were little changed last week, data showed yesterday,

Wall Street was down more than two per cent as London closed.

Disappointing earnings from global miner Rio Tinto and part state-owned Lloyds Banking Group also weighed on the mining and banking sectors respectively.

Shares in Lloyds and several other companies were suspended for a short period after their asking price fell too quickly.

“The [banking] sector remains in the long shadow of the banking crisis and continuing global economic difficulties, not to mention regulatory uncertainty. There was never going to be a quick way out of the woods,” Paul Mumford, senior fund manager at Cavendish, which has £700m of assets under management.

Britain’s central bank left interest rates at a record low yesterday and kept up its sleeve the option of more stimulus under its quantitative easing programme should an already struggling economy weaken further.

Spanish bond yields soared to their highest level since the inception of the euro as a still-deepening debt crisis threatened to swallow the larger economies of Italy and Spain.

The sell-off in European equities – including London this week – has wiped out around €288bn from company market capitalisation, about two-thirds of the €440bn capacity of the rescue fund set up by the European Union.

Gold rose to fresh all time highs as investors plumped for the precious metal’s safe haven qualities.

That lifted precious metals miner Randgold up 6.6 percent as investors bought the firm as an equity proxy for gold.

Elsewhere on the upside, Unilever rose 2.7 per cent as the consumer goods giant beat forecasts with second-quarter sales growth of 7.1 per cent.

Other defensively-perceived stocks benefited from a knock to investors’ risk appetite, with Imperial Tobacco up 1.3 per cent.