Monday, September 5, 2011

FTSE 100 sees £49 billion wiped off shares on euro fears and bank lawsuit

Forty-nine billion pounds was wiped off the value of the UK's leading shares on Monday following renewed fears over the health of the British economy and concerns over the fate of British banks being sued by US regulators.

The FTSE 100 tumbled 3.6pc - 189.45 points - to close at 5,102.58 after investor confidence was knocked by an unexpectedly sharp fall in services sector growth in August.

The Markit/CIPS services purchasing managers' index fell to 51.1 in August from 55.4 in July, the biggest drop since the foot and mouth crisis a decade ago. Economists were alarmed by the scale of the fall, which had been far larger than expected and triggered fears that the UK is now on course for a double-dip recession.

David Noble, chief executive of CIPS, described the decline in services growth as "eye-watering". Accounting for three-quarters of the UK economy, the services sector has a crucial impact on gross domestic product figures.

Investor confidence was also dented by the news that Royal Bank of Scotland, HSBC and Barclays are being sued by the US Federal Housing Finance Agency for their role in the sale of a combined $41.5bn (£25.8bn) of sub-prime mortgage debt to Fannie Mae and Freddie Mac, the American home loan financial institutions, in the run-up to the financial crisis.

Investors across Europe were also in cautious mode as key indices in Germany and France suffered heavy losses. more