FTSE Below 5,000 For First Time In YearPosted on Tuesday, August 9, 2011 - 17:39 pm
After days of heavy losses over US and eurozone debt worries, the FTSE dropped only 0.3% on opening but it later sank by more than 4%.
By lunchtime, much of those losses had been recovered.
Germany's DAX (Xetra: ^GDAXI - news) and the CAC 40 (Paris: ^FCHI - news) in Paris have been largely matching the FTSE's performance though a lower opening on Wall Street may determine whether european stocks plunge even further.
Today in Asia, the markets were down but avoided heavy losses.
Yesterday, the London market saw more than £46bn wiped off its value as concerns for the global economy grew following a rating downgrade in the U.S.
It closed down 3.4% meaning it posted four consecutive sessions of triple-digit losses for the first time in its 27-year history.
The FTSE has now lost more than 1,000 points in the space of a month.
There are now worries that the stock market falls could help push the global
economy into recession by destroying consumer confidence, prompting traders to
dump more stocks.
Louise Cooper, an analyst at BGC Partners, said there are bargains out there but "Equity markets are fearing a double-dip recession.
"Economic growth can be affected by share price falls because essentially it
makes businesses fearful for the future.
"And it affects ordinary people as well if your pension fund that you may have
spent 10 or 20 years saving for has effectively gone down 10% or 20% in days."
She added: "If they don't come up with something, it could be a bloodbath on
There are some benefits to consumers as a result of the market turmoil.
The cost of petrol should start to drop back again as oil prices tumble.
A barrel of Brent Crude is now hovering just above the $100 mark.
Britain is also a better credit risk than Germany for the first time since 2008.
Credit default swaps on British government debt were at 80 basis points yesterday, compared with 83 basis points for Germany.
It is the first time the cost of insuring British debt against default has been cheaper than that for Germany for almost 3 years - the latest evidence of escalation in the eurozone crisis.
Many economists suspect that Germany will have to bear the cost of further bailouts of euro members, which is now bearing down on its creditworthiness.
The chancellor George Osborne will be quietly delighted by the news, as it reinforces his plan to cut the deficit and refrain from directly supporting troubled euro members.