London market drops on debt, recession fears

Aug 5, 2011, 8:13 GMT

London - Shares in the FTSE 100 Index dropped in early trading Friday to their lowest levels in almost a year amid investor jitters over Europe's debt crisis and worries about the US economy.

The FTSE-100 index lost 156.86 points or some 3 per cent, to 5236.28 points in the opening minutes, the lowest level since last September, with losses led by the banking sector.

The early losses Friday came atop those on Thursday when the FTSE 100 Index closed down 3.4 per cent, its biggest single-day drop since March 2009.

Royal Bank of Scotland shares plunged 14 per cent in early Friday trading after publishing six-month figures showing losses of 794 million pounds. Lloyds Banking Group and Barclays shares each fell some 10 per cent.

Market analysts cited worries on the market after the Spanish government's cost of borrowing rose sharply in Thursday's debt auction, a sign that lenders had lost confidence in Madrid's ability to manage its debts.

At the same time, the markets were anxiously watching developments across the Atlantic, where Washington wad due later Friday to report latest unemployment data, amid worries that the US economy is sputtering on the brink of a new recession.

'The markets are in catch-up mode in early trade, having missed some of the late selloff in the US and a weak overnight performance in Asia,' commented Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers.

'The FTSE 100 currently stands 11.4 per cent down for the year, with an across-the-board markdown this morning,' he added.