LONDON, July 24: Britain’s leading shares lurched to their worst level for six years on Wednesday, as banks were hit by nagging concerns over the sector’s exposure to troubled US firms.
Royal & Sun Alliance suffered a 10.2 per cent fall as insurers were hit by mounting worry about their exposure to tumbling global equities.
But a strong bounce by US shares helped the FTSE come off the day’s worst levels late in the London session, and positive results from Prudential and GlaxoSmithKline also aided the mood.
The FTSE 100 benchmark index closed down 80.9 points, or 2.1 per cent, at 3,777.1, a new six-year closing low. Earlier it fell through 3,700 points for the first time since July 1996, to set an intraday low of 3,625.9.
The FTSE was helped off its low by a turnaround by US shares, aided by unconfirmed rumours the US Federal Reserve may act to try and halt the run on global equity markets.
Other European share prices also plunged to their lowest levels for five-years as accounting worries and disappointing corporate results.
Across the 12-nation euro zone, the Euro Stoxx 50 index plunged 5.0 per cent to 2,336.3 points.
The index had earlier touched a low of 2,293.1 points, the lowest level in five years. The losses left it down 40 per cent since the start of the year and 20 per cent over the past week alone.
Earlier in Asia, Tokyo shares fell 2.6 per cent and the Hong Kong market dived 3.1 per cent.
Among other leading European markets stocks fell 6.4 per cent in Amsterdam, 4.2 per cent in Madrid, 4.1 per cent in Milan, 6.0 per cent in Stockholm, and 4.4 per cent in Zurich.
Shares in French insurer AXA collapsed 11.5 per cent to 9.89 euros, Zurich Financial stock plunged 8.3 per cent to 143.5 Swiss francs, while Aegon shares fell 6.4 per cent to 11.5 euros.
Bucking the trend, shares in Prudential rose 2.6 per cent to 431 pence after the company moved to reassure investors worried that the group may be forced to sell shares in order to meet solvency requirements.
The comments came as the British insurer said operating profits fell to 543 million pounds in the six months to end June from 642 million pounds a year earlier.
But shares in Credit Agricole dived 11 per cent to 16.55 euros after the French bank warned it would have difficulty in matching its 5.0 per cent target for profit growth.
Among other leading banking stocks, Credit Suisse stock plunged 6.3 per cent to 28.85 Swiss francs, Dutch ING stock dived 4.9 per cent to 17.26 euros, and Barclays of Britain shares sank 5.0 per cent to 412 pence.
Shares in ABB plunged 17.6 per cent to 8.98 euros, after the Swiss-Swedish conglomerate posted a 41 per cent drop in first-half profits because of a 185 million dollar restructuring charge, and it warned there my be further charges to come.
US STOCKS: In New York, stocks leapt in heavy trading on Wednesday, driving the blue-chip Dow up more than 3 per cent after an early drop, as J.P. Morgan Chase & Co. Inc. took the bite out of fears of corporate malfeasance and helped spur bargain hunting in a market trounced to five-year lows.
J.P. Morgan soared $2.37, or almost 12 per cent, to $22.45 and emerged as the biggest percentage gainer on the blue-chip Dow. The stock had slammed to its lowest level since January 1996 earlier in the day.
The blue-chip Dow Jones Industrial average rallied 247 points, or 3.22 percent, to 7,950, after dropping more than 2 percent shortly after the open. The technology-loaded Nasdaq Composite Index rose 16 points, or 1.38 percent, to 1,246, after tumbling about 3 percent after the open. The Standard & Poor’s 500 surged 22 points, or 2.79 percent, to 819.—Reuters/AFP