Crisis-hit Footsie pulls back from the brink

By Hugo Duncan for the Daily Mail
Updated: 12:41 EDT, 15 August 2007

The FTSE 100 index today threatened to sink back towards 6000 in another day of jitters on world stock markets.

By lunchtime, the blue-chip index of leading shares had tumbled 99.7 points to 6043.8 while European stock markets were down between 1% and 2%.

Traders warned that further volatility could send the Footsie back below the key 6000 barrier for the first time since March as fears over the credit crunch continued to haunt investors.

The early sell-off across Europe followed heavy losses in Asia, where Tokyo's Nikkei 225 closed down 2%, or almost 370 points, while Hong Kong's Hang Seng index was off 3%, or more than 620 points.

On Wall Street this afternoon, the Dow Jones Industrial Average opened below the 13,000 mark as shares in Countrywide, the country's biggest mortgage provider, came under pressure. However, as nerves steadied, the Dow moved into positive territory and helped calm investors on this side of the Atlantic.

At the close, the Footsie was down 34.2 to 6109.3. The German market closed showing a slight gain, and though Paris and Madrid were down, the falls were much less than yesterday.

More than £75bn has been wiped off the value of blue-chip stocks in Britain in the past week as jitters about the impact of the collapse in subprime mortgage markets in US infect wider financial markets.

The 180-point rally on Monday following heavy losses at the end of last week has been almost entirely undone in the last two sessions as investors in the City run for cover. The FTSE 100 is now 350 points below its closing price of 6393.9 last Wednesday night.

Today's losses came as more bad news piled in from markets around the world. Wall Street was rocked last night by a rare profits alert from Wal-Mart, the world's largest retailer and owner of Asda supermarkets in Britain.

US lender Thornburg Mortgage Asset's shares slid 46% after it revealed liquidity pressures just hours after rival Aegis Mortgage filed for bankruptcy protection.

It also emerged that Goldman Sachs was forced to waive its fees to secure investment to bail out one of its leading hedge funds. The investment bank did not charge billionaire Eli Broad or former AIG chairman Hank Greenberg management fees when they agreed to plough $1bn (£499m) into its Global Equities Opportunities Fund.

Goldman, which itself put in a further $2bn, was desperate to attract new money after sudden drops in stock prices sent the value of the fund plunging by a third. The revelation came just hours after Swiss bank UBS warned the bloodletting will hit profits for the year.

The seizing-up of debt markets has left investment funds struggling to value their holdings because they cannot find any buyers for bonds backed by US mortgages. BNP Paribas of France suspended three of its investment funds last week because it could not 'fairly' value the securities in them.