FTSE hit by worst week in six years

8:25am Saturday 6th September 2008

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© Press Association 2008

THE UK's biggest companies have slid to more stock market losses in the worst week for the FTSE 100 Index for more than six years.

The declines end a recent two-month revival for the Footsie and come amid deepening fears over the global economy, a falling pound and record slumps in house prices.

Lower commodities prices have also hit the index as oil firms and miners make up around a third of the Footsie, while banks have also come under more pressure.

London's benchmark index tumbled seven per cent this week, bringing stocks back into "bear market" territory, more than 20 per cent below last October's peak. It is the worst fall since July 2002, when the Footsie followed US markets lower with an 8.5 per cent plunge in the wake of financial scandals such as Enron and WorldCom.

Oil prices have fallen sharply from above 118 dollars a barrel to 105 dollars this week as fears over the possible impact of Hurricane Gustav were unfounded, with concerns over a looming slowdown also denting demand.

Over the week FTSE All-Share oil and gas stocks have fallen more than seven per cent, while mining firms have slumped even further, losing 14 per cent.

Alongside the pressure on commodity stocks, Footsie heavyweight Vodafone also fell after handset maker Nokia warned of a tougher outlook amid fierce competition and a weaker economy.

Meanwhile, there was more gloom from the US after worse than expected jobless figures in August sent Wall Street to further losses.

Banks have also been under the spotlight amid uncertainty over what will happen when the Bank of England's Special Liquidity Scheme comes to an end on October 20.

Some analysts speculate that banks have borrowed as much as £200 billion under the scheme, which allows them to swap riskier assets for safe Treasury bonds, and a further squeeze on lending could result unless it is extended.