FTSE 100 sees a dramatic £77 billion drop

22 January 2008 / by Joy Tibbs
Reports indicate that London share prices experienced the most significant one-day fall yesterday since the 9/11 terrorist attacks in America more than six years ago. The total value of the stock market had fallen approximately £77 billion, or 5.5 per cent, by the end of the day.

Despite the preventative tax measures George Bush is planning to introduce, recession fears in the US are thought to have caused the decline which led to the record 323.5 percentage point loss. This compounds the market's worst start to a year since the index started 23 years ago, and volatile trading is expected to continue.

Declines were also seen in the Paris and Frankfurt markets, where combined losses exceeded £90 billion and there is now speculation that China's stock market could be the next to plummet following a delayed knock-on effect of the US sub-prime debacle.

"The situation is serious," International Monetary Fund managing director, Dominique Strauss-Kahn, told The Times. "All countries are suffering from the slowdown in growth in the US."

However, the banking segment appeared to hold its ground during yesterday's trading, with Lloyds TSB up 4.2 per cent, Royal Bank of Scotland up 2.6 per cent and HBOS rising 2.1 per cent. Homebuilders also saw positive growth, with Taylor Wimpey up six per cent and Persimmon rising 4.7 per cent.

"The question now is how much further there is to go and, equally importantly, at which point share prices get to levels which will tempt investors back in," head of UK equities at Hargreaves Lansdown, Richard Hunter, told Bloomberg.

Widespread pessimism has led to fears of a bear market for the FTSE and beyond. It is hoped that the decline may prompt the Government to slash interest rates next month after keeping the base rate at 5.5 per cent in January.

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