A dramatic run of setbacks, from across the globe, weighed heavily on London investors last night, driving the FTSE 100 Index to its lowest level in nearly three months.
London investors found themselves surrounded by bad news from every corner, with a wave of pessimism emanating from the US late last week finally washing over markets in Japan and then Europe.
Before the weekend lull, the US saw its three main markets plunge more than three per cent on Friday - its largest daily loss in two years. Warnings from General Motors, Ford and a surprise profits shortfall from IBM raised fears that US consumers are showing new caution and the economy is set to slow.
In Japan, share prices fell to a three month low as the Nikkei reacted to America's slump and fears that it will be hit by the growing tensions between Japan and China, apparently over a textbook. It plunged at its fastest rate since last May, leaving investors shaken as London trade opened.
Closer to home, Dutch electronic-firm Philips further undermined sentiment, unveiling a mammoth 79 per cent fall in first quarter profits, blaming cheaper flatpanel televisions and weak semi-conductor sales. Elsewhere on the continent, Fiat saw its shares briefly suspended after they dropped 11 per cent on fears over European car sales, a multibillion pound loan and a postponed annual shareholders' meeting.
The FTSE 100 ended the day down 64.5 points at
4827.1, recovering some ground from an earlier low of
96.8 points. Losses hit the whole range of blue-chip stocks, with oil, industrial, banking and insurance stocks among the fallers.
But having shed only 1.5 per cent of its value, the FTSE 100 was among Europe's better performers. Paris' Cac 40 dropped 2.1 per cent to end on 3,949.6 and Germany's Dax lost 2.6 per cent of its value on 4,202.6.
Japan's Nikkei 225 closed down 3.8 per cent on 10,938.
In early trade last night, the US markets looked to have stabilised, as it steadied itself for a stream of earnings reports over the coming week. Almost one third of the Standard & Poor's 500-stock are due to report 2005 first quarter earnings.