Britain's leading shares fell 1.4 percent on Wednesday, after a briefly rise midway through the session, as US recession fears and commodity stocks weighed. The FTSE 100 ended down 82.7 points at 5,942.9 after plunging 3 percent on Tuesday after US bank Citigroup reported $10 billion in quarterly losses, prompting the company to cut its dividend and 4,200 jobs.
But halfway through Wednesday's session, European equity markets briefly pared losses after US industrial production for December came in stronger than expected. Mining stocks fell as precious and base metal prices dipped. Antofagasta lost 6.8 percent and Kazakhmys dropped 5.8 percent.
Rio Tinto, fighting a take-over approach from rival BHP Billiton, shed 6.6 percent despite saying it produced record tonnages of iron ore, copper and other industrial minerals in 2007. Oil slid more than $2 a barrel to below $90 for the first time since mid-December amid signs that slowing US economic growth will erode fuel demand. Royal Dutch Shell gave up 2.6 percent and rival BP shed 1.6 percent. J.P. Morgan cut its price target on the latter to 650 pence from 690 pence and rated the stock at "neutral".
"The market today is pretty awful really," said Peter Dixon, an economist at Commerzbank. "We're in the repricing mode at the moment." Banks also weighed on the blue chip index, which breached below the psychological 6,000 barrier and at its lowest point since mid-August 2007. Lloyds TSB was down 2.9 percent, HBOS was off 1.6 percent and HSBC fell 2.5 percent.
London Stock Exchange lost 5.7 percent as traders cited a negative note from Sanford Bernstein. Cable & Wireless fell 3.5 percent after Morgan Stanley cut the stock to "equal weight" from "overweight".
British Airways rose 4.3 percent to 289.56 pence after Goldman Sachs upgraded its rating on the stock to "buy" from "neutral". However, the broker cut its price target on the airline to 330 pence from 350 pence and reduced its 2009 and 2010 EPS estimates by 15 and 19 percent, respectively.
Imperial Tobacco, which fell, and British Land, which rose, both traded without the rights of dividend this session. British Land topped the FTSE 100 gainers, up 4.4 percent after J.P. Morgan said in a note that it is time for investors to think contrarian and buy certain property stocks. SEGRO added 6.2 percent.
Anglo-Swedish drugmaker AstraZeneca climbed 3.2 percent after Goldman Sachs upgraded the stock to "buy" from "neutral" and added the shares to its conviction buy list.
"Fundamentals remain difficult and the long term story is not compelling," said Goldman analysts in the note. "But at current levels we believe it represents a mean reversion play and as a result offers a compelling short-term trading opportunity." Looking ahead, investors await earnings from Merrill Lynch on Thursday and US housing data. Citigroup expects a $15 billion fourth-quarter writedown at Merrill and said CDO/subprime exposures will decline by 50 percent to 70 percent in aggregate. See.
Before this however, the Federal Reserve is due to release its Beige Book of regional economic conditions at 1900 GMT. "Quite where the shake-out will end is uncertain - news of an emergency rate cut from the Fed may help, but at the same time it's simply going to underline the fragile state of global markets," said Jimmy Yates, a dealer at CMC Markets.