Miserable Monday: Biggest FTSE crash since 9/11 wipes off more than £75bn in shares Last updated at 03:52am on 22.01.08
Turmoil: Traders at the London Stock Exchange have seen the FTSE drop sharply since the beginning of JanuaryThe stock market went into meltdown yesterday with the biggest fall in share prices since 9/11.
More than £75billion was wiped off the value of Britain's 100 biggest companies amid fears of a recession in the U.S.
It is the worst start to the year for the stock market since records began in 1936 and left the Bank of England facing acute pressure to slash interest rates.
A quarter point cut to 5.25 per cent is already predicted at the next meeting of its Monetary Policy Committee in two weeks.
But yesterday's dramas took the need for action to a new level. With each day it is becoming clear that the credit crunch is worsening and the risk of a global slowdown increasing.
It is no longer a question of whether rates will be lowered but how quickly and how far. Some analysts expect a rate of 5 per cent or lower by the summer, providing much-needed relief to home buyers.
The respected economists from the Ernst & Young ITEM Club expect rates to be cut three times to 4.75pc by the end of 2008.
In a disastrous day for investors, every single stock market in Europe and Asia plummeted, with falls of up to 8.5 per cent.
The FTSE 100 plunged an extraordinary 323.5 points to close at 5,578, a fall of 5.5 per cent.
Since January 2 it has lost nearly 1,000 points, or 13.6 per cent, hammering savings, pensions and other investments.
Scroll down for more...
Pointing the way: A trader signals the direction of UK and European indices after the biggest single fall in Japan since 9/11
All eyes will be on Wall Street today when the Dow Jones index re-opens. It was closed yesterday for a holiday, but the futures market remained open and offered a grim portent, falling 546 points or 4.5 percent.
Should the Dow follow a similar pattern it would rank as the fourth-largest point loss ever for the New York exchange. Last night experts were forecasting a 400-point drop.
David Buik, a partner at the brokers BGC Partners, said: "The smell of fear hangs over the City. I've never seen it this bad."
The timing could hardly have been worse for Chancellor Alistair Darling, who was yesterday detailing plans to save Northern Rock by turning its £25billion Bank of England loan into bonds and selling them to investors.
The market meltdown was triggered by growing fears about the health of the global economy and particular concerns about America and China.
Analysts fear President Bush's £75billion of tax cuts unveiled on Friday, designed to help consumers rescue the economy by spending, will not be enough to prevent the world's biggest economy from slipping into recession. There were also fears that
the sub-prime loan crisis could have spread as far as China. Rumours circulated yesterday that the Bank of China could be about to write-down losses of more than £1billion linked to the subprime debacle in the U.S.
Martin Slaney, of traders GFT Global Markets, said: "A gloomy concoction of poor economic and corporate news plus a growing acceptance that the sub-prime fallout has much further to go has created the highly distressed conditions for a global sell-off in equities."
There was further gloom with a triple whammy of poor public sector finance figures, a collapse in mortgage lending and another investment giant imposing a long delay releasing investors' money.
The Government deficit soared to £7.8billion, the highest December figure on record, the Office for National Statis-
For the nine months to the end of December it soared by more than £10billion to £43.6billion, the worst figure since records began in 1993.
Conservative Treasury spokesman Philip Hammond said: "Psychologists say this is Blue Monday, the most depressing day of the year. It certainly is for Alistair Darling.
"But it will be hard-pressed families who will have to pick up the pieces through yet more stealth taxes."
Analysts were warning that the Government may have to raise taxes by more than £10billion to claw its way out of trouble. In another blow, mortgage companies revealed the biggest monthly fall in lending since records began.
The amount handed out in December showed a 25 per cent fall from November at £22.6billion, down £7.3billion. The normal seasonal reduction is around six per cent.
The fall is seen as indicative of the difficulties facing thousands of aspiring homebuyers struggling to find a mortgage they can afford. Research from the website Money-Expert.com shows more than 460,000 people have missed at least one mortgage repayment over the last six months.
Another savings giant yesterday shut the door to investors seeking to take out money.
Around 200,000 clients of Scottish Widows's £2billion property funds will be forced to wait six months to withdraw their cash.
It is the second firm in a week to hit the panic button over the high number of investors rushing to bale out.
The pressure for an interest rate cut was heightened last week by none other than Bank of England Deputy Governor Sir John Gieve, who said a move was needed to halt a slowing economy.
And yesterday the head of the country's most powerful retailer urged the Bank to "get on with" cutting rates.
Sir Terry Leahy, chief executive of Tesco, said that consumer confidence was "well down" and inflation was "under control".
Turmoil: Traders at the London Stock Exchange have seen the FTSE drop sharply since the beginning of JanuaryThe stock market went into meltdown yesterday with the biggest fall in share prices since 9/11.
More than £75billion was wiped off the value of Britain's 100 biggest companies amid fears of a recession in the U.S.
It is the worst start to the year for the stock market since records began in 1936 and left the Bank of England facing acute pressure to slash interest rates.
A quarter point cut to 5.25 per cent is already predicted at the next meeting of its Monetary Policy Committee in two weeks.
But yesterday's dramas took the need for action to a new level. With each day it is becoming clear that the credit crunch is worsening and the risk of a global slowdown increasing.
It is no longer a question of whether rates will be lowered but how quickly and how far. Some analysts expect a rate of 5 per cent or lower by the summer, providing much-needed relief to home buyers.
The respected economists from the Ernst & Young ITEM Club expect rates to be cut three times to 4.75pc by the end of 2008.
In a disastrous day for investors, every single stock market in Europe and Asia plummeted, with falls of up to 8.5 per cent.
The FTSE 100 plunged an extraordinary 323.5 points to close at 5,578, a fall of 5.5 per cent.
Since January 2 it has lost nearly 1,000 points, or 13.6 per cent, hammering savings, pensions and other investments.
Scroll down for more...
Pointing the way: A trader signals the direction of UK and European indices after the biggest single fall in Japan since 9/11
All eyes will be on Wall Street today when the Dow Jones index re-opens. It was closed yesterday for a holiday, but the futures market remained open and offered a grim portent, falling 546 points or 4.5 percent.
Should the Dow follow a similar pattern it would rank as the fourth-largest point loss ever for the New York exchange. Last night experts were forecasting a 400-point drop.
David Buik, a partner at the brokers BGC Partners, said: "The smell of fear hangs over the City. I've never seen it this bad."
The timing could hardly have been worse for Chancellor Alistair Darling, who was yesterday detailing plans to save Northern Rock by turning its £25billion Bank of England loan into bonds and selling them to investors.
The market meltdown was triggered by growing fears about the health of the global economy and particular concerns about America and China.
Analysts fear President Bush's £75billion of tax cuts unveiled on Friday, designed to help consumers rescue the economy by spending, will not be enough to prevent the world's biggest economy from slipping into recession. There were also fears that
the sub-prime loan crisis could have spread as far as China. Rumours circulated yesterday that the Bank of China could be about to write-down losses of more than £1billion linked to the subprime debacle in the U.S.
Martin Slaney, of traders GFT Global Markets, said: "A gloomy concoction of poor economic and corporate news plus a growing acceptance that the sub-prime fallout has much further to go has created the highly distressed conditions for a global sell-off in equities."
There was further gloom with a triple whammy of poor public sector finance figures, a collapse in mortgage lending and another investment giant imposing a long delay releasing investors' money.
The Government deficit soared to £7.8billion, the highest December figure on record, the Office for National Statis-
For the nine months to the end of December it soared by more than £10billion to £43.6billion, the worst figure since records began in 1993.
Conservative Treasury spokesman Philip Hammond said: "Psychologists say this is Blue Monday, the most depressing day of the year. It certainly is for Alistair Darling.
"But it will be hard-pressed families who will have to pick up the pieces through yet more stealth taxes."
Analysts were warning that the Government may have to raise taxes by more than £10billion to claw its way out of trouble. In another blow, mortgage companies revealed the biggest monthly fall in lending since records began.
The amount handed out in December showed a 25 per cent fall from November at £22.6billion, down £7.3billion. The normal seasonal reduction is around six per cent.
The fall is seen as indicative of the difficulties facing thousands of aspiring homebuyers struggling to find a mortgage they can afford. Research from the website Money-Expert.com shows more than 460,000 people have missed at least one mortgage repayment over the last six months.
Another savings giant yesterday shut the door to investors seeking to take out money.
Around 200,000 clients of Scottish Widows's £2billion property funds will be forced to wait six months to withdraw their cash.
It is the second firm in a week to hit the panic button over the high number of investors rushing to bale out.
The pressure for an interest rate cut was heightened last week by none other than Bank of England Deputy Governor Sir John Gieve, who said a move was needed to halt a slowing economy.
And yesterday the head of the country's most powerful retailer urged the Bank to "get on with" cutting rates.
Sir Terry Leahy, chief executive of Tesco, said that consumer confidence was "well down" and inflation was "under control".
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