FTSE hits seven-week closing low as fears over recovery’s strength intensify

BRITAIN’S top share index fell to a seven-week closing low yesterday on growing unease that the global economy may slip back into another recession following further weak economic data from the United States.

New orders for long-lasting US made goods rose far less than expected in July and, excluding transportation equipment, posted their largest decline in 1-1/2 years, while new US single-family home sales unexpectedly fell last month to set their slowest pace on record.

Also illustrating concerns over global growth, the world’s largest miner BHP Billiton said it was cautious on the short-term outlook and the economy in China, its biggest customer, would slow from recent highs.

Shares in BHP, which reported bumper results yesterday, fell 2 per cent, while the sector lost 1.8 per cent.

However, robust company earnings helped limit the losses on the FTSE 100, which closed 46.55 points or 0.9 per cent lower at 5,109.40, after trading as low as 5,070.94.

A one-notch downgrade of Ireland’s credit rating by Standard & Poor's also weighed on sentiment as it reignited concerns over sovereign debt issues at Eurozone peripheral economies.

Tullow Oil sank 4.6 per cent, the second biggest faller on the FTSE 100, after saying development of its Ugandan oil fields would be delayed due to a spat between the government and its former partner.

Economically-sensitive banks fell 1.1 per cent, with Barclays down 3.6 per cent. As investors sought safer shelter, the yield on the 10-year British gilt hit an all-time low of 2.790 per cent. By comparison, the UK blue chip index offered a dividend yield of 3.54 per cent.