FTSE suffers biggest fall since 2001

January 22, 2008

By Larry Elliott (View author info)
Copyright The Guardian

Fears that 2008 will see the looming recession in the US spreading to every other continent triggered a global crash in share prices yesterday, wiping £77bn off the value of the City's blue-chip stocks in the biggest one-day points fall in London's history.

On a day of panic selling, hefty overnight falls on far eastern stock markets prompted a ripple effect through Europe and left the City's FTSE 100 index down 323.5 points at 5578.2 at the close.

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, warned western countries to expect knock-on effects from the slowdown in the US, the world's biggest economy. "The situation is serious," Strauss-Kahn said after meeting the French president, Nicolas Sarkozy. "All countries in the world are suffering from the slowdown in growth in the United States, all countries in the developed world."

Graham Turner of GFC Economics said the gloomy mood in the markets might have been the delayed reaction to news last week of financial troubles for the US companies that insured the bonds linked to subprime mortgages, the value of which has plummeted as a result of falling real estate prices and rising home repossessions.

Instructions:

Click here to find the remainder of the article