Market report: Monday close
The FTSE 100 plunged by 323.5 points to close down 5.5% as fears of a US recession sparked a sell-off across the European markets.
With Wall Street closed for the Martin Luther King holiday a collapse in mining stocks, which have been supporting the struggling market as the credit crunch hits, saw fresh fears over the global economy.
The FTSE 100 closed at 5578.2, having earlier seen the biggest fall in six years to a low for the session of 5571. The FTSE 250 was down 419.5 at 9260.
Heavy selling of mining giant Rio Tinto in Australia overnight saw the shares slump 472p to 4228p.
There is growing concern among City speculators that BHP Billiton, the world's biggest mining outfit, is reluctant to increase its offer for Rio to create a giant weighing in at £150bn.
BHP, down 143p at 1235p, is making an all-paper offer on the basis of three of its own shares for every one of Rio's. Shares in Rio rose sharply on Friday in the belief BHP was poised to raise the terms to 3.6 shares.
Xstrata fell 184p to 3179p. Brazilian miner Vale do Rio Doce plans to offer $90bn (£44bn) for Xstrata. But there has been a change of heart among Australian investors, who feel pressure being brought on BHP to introduce a cash element to the bid may force it to walk away. BHP has until 6 February to 'put up or shut up&39;.
The rest of the miners were also left nursing falls with Vedanta down 141p at 1591p, Kazakhmys 114p to 1041p and Anglo American 238p to 2353p. Their heavy weighting among the constituents of the FTSE 100 index meant the rest of the market took a pasting.
The contagion started this morning in Asia. Hong Kong's Hang Seng index fell more than 1300 points, or 5.5%, while Tokyo's Nikkei Average lost 535 points (4%). Paris and Frankfurt took big hits later.
Wall Street was closed today for Martin Luther King Day but the Dow future was still being traded, and was at one stage down more than 550 points at 11,549.3. Said one trader: 'Its official! We are now in a bear market, and things do not look like getting any better shortterm&39;.
Selling pressure in London was described as light, but an absence of buyers exacerbated the falls. It didn't take long for the rumour mill to start up, with the gossips saying US banking giant Citigroup was struggling to find backers for its refinancing programme.
One of the few blue-chips to gain ground was Friends Provident, up 5.5p at 158p after private-equity outfit JC Flowers admitted it had bought a near-3% stake and was interested in bidding for the rest. Friends has been a weak market of late after its aborted merger with Resolution.
There was no let-up for retailers. Marks & Spencer fell 3½p to 411p after JPMorgan cut from neutral to underweight. The US investment bank has also switched Next, down 80p to 1300p, from overweight to neutral.
National Grid fell 43p to 794p despite HSBC rating it a strong defensive play and jacking up its target from 860p to 970p.
Entertainment Rights, the outfit behind children's favourite Postman Pat, rose 0.4p to 8.4p after saying it had received a bid approach. Dresdner Kleinwort had earlier cut the shares from buy to hold and slashed its target from 27p to 8½p.
• We'll email to warn of sharp moves in the market: Newsflashes
TOMORROW'S AGENDA
• Land Securities, owner of the illuminated ads at Piccadilly Circus and almost 5% of the capital's office space, issues a trading statement. Its shares have taken a battering since the start of 2007 because of the rocky state of the commercial property market. In November, chief executive Francis Salway announced plans to split the company into three, its retail and London office divisions and property management arm Trillium becoming separately listed firms by the year end.
• Financial Services Authority chairman Sir Callum McCarthy and chief executive Hector Sants give evidence to the Treasury Select Committee on the FSA's annual report. The watchdog's bosses are also likely to face MPs' questions on Northern Rock.
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