The FTSE 100 of Britain's leading shares slid by the biggest one-day percentage since March 2003 on Thursday as a flurry of corporate results failed to offset losses driven by concerns over a US credit crisis. Worries that a rise in defaults on US subprime mortgage loans could spiral into a broader financial crunch have stalked markets since mid-June.
The FTSE 100 ended down 203.1 points, or 3.2 percent, at 6,251.2 to their lowest close since in almost four months. Banking and mining sectors were worst hit by the economic jitters, with HBOS down 3.1 percent and Northern Rock falling 5.8 percent. Credit Suisse also cuts its price target on Northern Rock.
Among miners, Anglo American lost 6.2 percent and Rio Tinto shed 4.5 percent. In the few shares that ended the session in positive territory, insurer Resolution added 2.5 percent to top the FTSE 100 leaderboard, after Pearl Assurance raised its interest in the company. Resolution declined comment.
A source close to the matter said Pearl plans to hold talks with Resolution's management over its proposed merger with rival Friends Provident, adding Pearl would consider its options. Friends Provident lost 6.5 percent.
British Energy and National Grid both sneaked onto the upside as traders cited investors moving to defensive stocks. "It's been another day of heavy selling in London with equities under pressure off the back of mixed earnings data and continued concerns over the impact of the credit crunch across the Atlantic," said Jimmy Yates, a trader at CMC Markets.
"Wall Street also kicked off the session on a downbeat note, shedding well over 100 points in the opening minutes, with results news undoubtedly weighing... there's concern creeping into equity markets as to just how much longer this run lower will now last for."
Top loser of the day was insurer Legal & General, which fell 8.2 percent after promising a 1 billion pound ($2.1 billion) share buyback and a higher dividend. But lower margins and disappointment it did not commit to returning more capital dragged it deep into the red. A 40 million pound ($82.39 million) bill for UK floods in June pushed L&G's general insurance business into an operating loss in the first half of the year.
Intercontinental Hotels Group shed 7.5 percent as traders cited a lack of new information on persistent bid speculation that has boosted the share price in recent months and the turmoil that has hit the credit market.
"The fall in the markets will not end until the full effect of the subprime fallout is known," said one trader. "The FTSE has underperformed the major benchmarks recently and may well have run its course in the short term. "However with the Bank of England meeting next month there will be nerves and caution in case there is an interest rate hike although it's unlikely," he added.
BT Group showed it has pulled further ahead in Britain's highly competitive broadband market as it met forecasts with a 3 percent increase in first-quarter core earnings and revenues.
But its shares lost 5.3 percent as analysts said there was little in the statement to excite a shaky market while some said that its free cash flow figure was disappointing. Among pharmaceuticals, AstraZeneca dipped 3.1 percent after it announced plans to axe around 7,600 jobs as part of an expanded cost-cutting drive, as it nudged up its 2007 earnings outlook.
Shire reversed an earlier 6 percent jump to close down 0.6 percent after it nudged up its 2007 revenue growth forecast, boosted by a string of drug launches, and said its biggest new hope, Vyvanse for hyperactivity, had made a strong start.
Royal Dutch Shell followed other oil sector stocks down, to close 1.6 percent lower despite posting a 20 percent rise in second-quarter profits as fat refining margins helped outweigh lower output.