FTSE trembles as stocks slide
THE FTSE 100 index tumbled back below the 6000 level – closing down 172.87 points at 5935.84 – on another bruising day for savers and pension funds.
That wiped £44bn off the value of Britain’s blue-chip firms.
It also left the Footsie at its lowest level since ‘Black Monday’ on August 24 when the ‘Great Fall of China’ saw the stock market in Shanghai dive 8.5pc – leading to a near-5pc drop in London.
The sell- off rounded off a bleak day for the UK economy as a surge in Government borrowing and disappointing manufacturing figures dented confidence in the recovery.
The losses on the Footsie were echoed across Europe and in the United States with shares diving in Frankfurt, Paris, Milan and Madrid as well as on Wall Street.
Mining stocks were among the biggest losers in London as angst about the health of the global economy – and China in particular – drove down the price of raw materials such as copper and oil.
European car makers were hammered as the fallout from the emissions-rigging scandal at Volkswagen took its toll on rivals including BMW, Daimler and Renault.
Tony Cross, a market analyst at online trading firm Trustnet Direct, said: ‘It’s been a punishing day for equity markets on both sides of the Atlantic and although the sell-off in London may look weighty the picture is even bleaker across mainland Europe.
‘The ongoing slump in commodity prices is certainly driving a large slice of the losses in London, but further afield it’s car manufacturers that are under pressure. There’s also a feeling that traders globally may be bracing themselves for more bad news out of China.’
Disappointing economic figures in the UK did little to lighten the mood and piled pressure on Chancellor George Osborne. The Office for National Statistics said the Government borrowed £12.1bn last month, the worst August for the public finances since 2012, and up from £10.7bn in August last year.
The tax take fell by £279m to £45.7bn as corporation tax receipts dropped 14.1pc to £1.4bn and income tax payments slipped 3.5pc to £11.9bn.
Borrowing in the first five months of the fiscal year, from April to August, was £4.4bn less than in the same period last year at £38.4bn.
But Osborne’s plans involve cutting the annual deficit by another £20.6bn to £69.5bn this year, leaving plenty to do to reach the target.
The national debt is about £1.5trillion, 80.6pc of GDP and £60,000 per household. David Kern, chief economist at the British Chambers of Commerce, said: ‘We clearly face a major task in restoring stability to our public finances.’ The Treasury said the deficit has been reduced from 10.2pc of national income, or £153.5bn, under Labour in 2009-10 to 5pc last year.
‘Britain’s hard work is paying off,’ said a spokesman. ‘We have more than halved the deficit but there’s more to do with debt remaining higher than 80pc of GDP. There’s no short cut to fixing the public finances to provide economic security for working people.’
But the CBI business lobby group’s latest survey of British manufacturers found output stalled this month after two-and-a-half years of growth.
Rain Newton-Smith, director of economics at the CBI, said: ‘Exports are the missing link in the UK recovery at the moment.’
Paul Hollingsworth, UK economist at Capital Economics, said manufacturing is worryingly weak.
He said: ‘The service sector should continue to perform well given high consumer confidence, low unemployment and rising real wages in the UK. We don’t think that the economic recovery as a whole is about to lose considerable pace.’