Fears over Chinese economy hit Footsie

THE global stock market rout continued as worries over a developing credit crunch in China and an end to money-printing in the United States ensured more pain for investors.

The FTSE-100 index closed down 87.07 points at 6029.10, continuing sharp falls seen last week – including a 3% plunge on Thursday.

Germany’s Dax and France’s Cac 40 also closed sharply lower yesterday.

A recent surge above 13% for China’s inter-bank lending rate has fuelled worries of a credit crunch that could threaten the growth of the world’s secondlargest economy.

Markets have been spooked by America’s plans to scale back its vast quantitative easing (QE) drive, with the London market now at its lowest level since the start of the year.

Until recently, money-printing by central banks had inflated stock markets around the world, as investors were pushed into riskier assets such as equities.

The Footsie last month neared a high seen during the dotcom boom in 1999, while the Dow Jones raced to record levels.

But markets have since been dragged lower as investors have fretted over the end of QE – despite it signifying better economic conditions.

Ishaq Siddiqi, marke t strategist at ETX Capital, said: “Investors were left wondering if the US Federal Reserve could bring its tapering forward if we see a strong upswing in the US economic data in the weeks ahead.”

Yields on government bonds have also raced higher in response to the Fed’s QE tapering plan, with 10-year UK gilt yields hitting their highest level for almost two years.

Governments have seen borrowing costs rise in recent weeks as a global bond sell-off depresses bond prices and pushes up yields.

Defensive stocks provided some shelter for investors, with 140 81 25 1331 122 285 1148 4903 830 309 307 2333 381 1121 598 1443 113 1343 1026 707 +43 +21 + +31 +3 +51 +18 +63 +10 +33 -43 -353 -43 -87 -451 -101 -8 -91 -71 -48 +3.47 +2.86 +2.76 +2.70 +2.52 +1.86 +1.59 +1.38 +1.22 +1.11 -13.28 -13.25 -11.02 -7.34 -7.07 -6.76 -6.61 -6.59 -6.47 -6.36

and up 14p to 1628p and 6.5p to 655.5p respectively. In the FTSE 250 index,

was on of the biggest fallers with a decline of 11% after a brokerage downgraded its debt. The PC World and Currys owner posted results last week showing a 15% rise in underlying full-year profits as it benefited from the demise of rivals and the continued popularity of products such as tablet computers.

The shares have gained by around 160% in the last year but were down by 4.72p to 38.1p yesterday after a broker downgrade.

The biggest risers on the Footsie were United Utilities, up 6.5p to 655.5p, Severn Trent, 14p ahead to 1628p, 14p stronger to 1643p, and G4S, up 1.5p to 233.5p.

The biggest fallers were down 71p at

off 1026p, 114p to 2260p, down 13.5p to 273.45p, and worries over China weighed on

as it finished the day down 15.3p to 348.9p. STOCKS fell more than 1%, adding to a sell-off built on concerns about reduced stimulus from the Federal Reserve and on overnight losses in Chinese equity markets.

The market shed some of the day’s losses in the afternoon, but it was the third time in the past four sessions that the Standard & Poor’s 500 index dropped more than 1%. Volume was again above-average, with 8.33 billion shares traded on US exchanges, a sign the pullback has not abated yet.

Losses at one point extended as far as 2%, but stocks retraced some ground after two Fed officials downplayed the notion of an imminent end to monetary stimlus.

“We were really oversold in many different indices, so you would expect a bounce. The trick is, is this going to continue tomorrow?” said Sam Ginzburg, head of capital markets at First New York in New York.

“I would be careful of this move up. I wouldn’t be sure it sticks as of this time.”

Mr Ginzburg said he would like to the S&P close over 1600 points, a level which was support but now is resistance.

All 10 industry sectors on the S&P 500 ended lower, led by declines in materials, industrials and financial shares. Those sectors are most sensitive to the g rowth outlook and rising interest rates.

The Dow Jones industrial average finished down 139.61 points, or 0.94%, at 14,659.56, the S&P 500 gave up 19.34 points, or 1.21%, at 1573.09, and the Nasdaq Composite index shed 36.49 points, or 1.09%, at 3320.76.