Britain's top share index lost 7.2 percent on Wednesday, ending a two-day rally, as commodity stocks slumped amid growing fears of global recession. The FTSE 100 ended down 314.6 points at 4,079.6, erasing a big chunk of the near 12 percent rebound seen in the previous two sessions after plummeting 21 percent last week, its second worst weekly fall on record.
"It's all or nothing with the FTSE at the moment, with yet another large one-day movement," said Tim Hughes, Head of Sales Trading at IG Index. Miners were the biggest losers, as base metal prices fell and after Rio Tinto warned of slowing Chinese demand for commodities and signalled a possible delay in plans to sell $10 billion in assets.
Rio Tinto shares lost 16.6 percent, while Eurasian Natural Resources dropped 25.2 percent, Kazakhmys shed 22.3 percent, Anglo American slumped 20.1 percent, and Xstrata sank 19.6 percent. Weaker oil prices weighed on heavyweight energy stocks, with BP, Royal Dutch Shell, BG Group and Cairn Energy dropping between 6.8 and 12.2 percent as crude shed another $3 a barrel.
Banks were also big fallers, with the FTSE 350 banks index down 5.7 percent as heavyweights HSBC and Standard Chartered lost 6.5 and 11.9 percent. Lloyds TSB ended down 0.7 percent having seen gains earlier on newspaper reports the government was considering a U-turn to allow dividend payments to shareholders while still taking advantage of its 37 billion pounds bank bailout scheme.
HBOS, which Lloyds TSB is taking over, was one of only two FTSE 100 risers, up 0.5 percent, with tour operator Thomas Cook the other, up 1.2 percent. Insurers fell after The Times said the Financial Services Authority had stepped up its scrutiny of leading life assurers amid concerns that crumbling investment markets were putting their solvency levels under pressure.
Negative sector comment from Deutsche Bank also weighed, with the broker cutting price targets and earnings estimates and highlighting possible dividend cuts. Old Mutual, Prudential, Aviva, Friends Provident and Standard Life fell between 8.4 and 18.1 percent. Friends Provident also traded lower as new buyers no longer qualified for its next dividend.
Worries about a deeper recession mounted as British unemployment figures showed their biggest rise in 17 years in the three months to August, taking the jobless rate to its highest level in eight years. Across the Atlantic, blue chip stocks dropped 3.5 percent Wednesday as recession fears intensified after US retail sales in September recorded their biggest monthly drop in more than three years.
Among UK mid caps, broker comment coupled with recession fears had an influence on two engineering groups. Ceramic materials firm Cookson shed 18.9 percent as Goldman Sachs cut its rating to "neutral" from "buy" and chopped its target price to 350 pence from 819. Industrial engineer Charter lost 19.5 percent as Panmure Gordon downgraded its stance to "hold" from "buy" and slashed its target price to 615 pence from 1,160.
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