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International Herald Tribune: FTSE suffers biggest loss since 9/11: ‘BP and Royal Dutch Shell fell between 5.6 and 6.3 percent’

By Michael Taylor ReutersPublished: January 21, 2008

LONDON: The FTSE 100 fell 5.5 percent on Monday, suffering its largest one-day loss since September 11, 2001 as the index tracked global markets lower on deepening fears of a possible U.S. recession.

The FTSE 100 closed down 323.5 points at 5,578.2, its lowest close since June 2006 and wiping nearly 77 billion pounds from the value of its constituent stocks.

The blue-chip index has now lost more than 13 percent since the start of the year.

“Very nervous,” said Jawaid Afsar, a trader at Securequity on the current equity climate. “It is very, very nerve-racking. It’s very frightening and people are just concerned (over) recession fears, credit fears … Writedowns and all the rest of it are just part of the same sort of thing at the moment.”

Last week President George W. Bush called for a package of tax cuts and other measures of around $140 billion to $150 billion (72 to 77 billion pounds) to shore up the U.S. economy, battered by the subprime mortgage crisis and subsequent credit crunch.

Today in Business with Reuters
European and Asian markets plunge on U.S. recession fearsVale, Brazilian mining giant, in talks to acquire Xstrata’No chance’ of purely private-sector rescue for Northern Rock
But widespread doubts over the effectiveness of such action sent U.S. stocks reeling on Friday to close out the worst week for the S&P 500 in five years, while Tokyo’s Nikkei shed 3.9 percent on Thursday.

U.S. markets are closed on Monday for Martin Luther King Day.

“We are (already in a U.S. recession),” added Afsar. “Up until last week I was thinking we might escape, but when those consumer figures came out on Friday, they clearly did show there was some concerns lingering and it was hurting the broad economy across the range.

Vulnerable financial stocks were worst hit, taking over 63 index points off the FTSE 100. Among the worst hit, HSBC and Royal Bank of Scotland shed over 6 percent.

Elsewhere oil slid by almost $2 to a six-week low below $89 a barrel on concern over an economic slowdown led by top consumer the United States.

BP and Royal Dutch Shell fell between 5.6 and 6.3 percent.

Miners, sensitive to global economic growth fears, took a beating as base metal prices slipped. Vedanta lost 8.1 percent and Antofagasta shed 4.1 percent.

Xstrata jumped as much as 4.8 percent earlier in the session after Brazilian mining giant Vale said it has held takeover talks with its Anglo-Swiss rival, which analysts said could lead to deal worth more than $100 billion. Xstrata ended down 5.5 percent.

Also falling with the market, Rio Tinto dropped 10 percent and BHP Billiton fell 10.3 percent after the latter failed to make a higher bid as rumoured.

BHP, which proposed a three-for-one share swap last November, has until February 6 to make a formal offer for Rio , or walk away under a deadline imposed by the UK Takeover Panel.

NORTHERN ROCK BUCKS TREND

With only four positive shares on the FTSE 100, midcap stock and troubled mortgage lender Northern Rock went against the grain by climbing 46.1 percent, after earlier rocketing as much as 55 percent.

Britain has set a two-week deadline for a private-sector rescue of Northern Rock, as it confirmed plans to convert its almost 25 billions pounds of loans to the stricken bank into bonds in a bid to smooth a deal.

Friends Provident was one of the four gainers on the FTSE 100, up 3.6 percent after U.S. private equity firm JC Flowers said it is considering making an offer for the insurer.

Housebuilder Taylor Wimpey gained 1.4 percent as traders cited sector rotation.

“An incredible day of trading for the UK stock market,” said Tim Hughes, head of sales trading at IG Index. “Today’s focus was all about the broader market … The big question for investors … is whether the re-opening of Wall Street trading is going to bring some respite from the selling pressure.”

(Additional reporting by Dominic Lau and Rebekah Curtis; Editing by David Holmes)

http://www.iht.com/articles/reuters/2008/01/21/business/OUKBS-UK-MARKETS-BRITAIN-STOCKS.php

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