The FTSE 100 fell more than 3 per cent on Thursday, taking the blue-chip index into official correction territory after falling more than 10 per cent from its most recent peak in May.
Heavy selling of mining companies, oil groups and banks, the largest capitalised sectors on the London market, dragged the FTSE 100 down by 191, points, 3.4 per cent lower on the day to 5,393.14 – its lowest mark of the year and 11.3 per cent below the closing price of 6,082.9 reached on May 3.
The latest sell-off follows a week of selling on international markets as fears about the outlook for the global economy have grown. Recent data from the US has showed signs the economy is slowing and the latest sell-off comes ahead of what is viewed as a crucial employment report on Friday.
“The sharp falls for the FTSE 100 is a big concern going into tomorrow’s non-farm payrolls figure,” said Joshua Raymond, market strategist at City Index.
The renewed selling followed four successive sessions of declines, and intensified as US markets also fell sharply in morning trade on Wall Street.
Trading in Lloyds Banking Group was volatile after its interim profit report. At the end of the session, banks were sharply lower and Lloyds fell 10.2 per cent to 35p, losing initial gains of almost 2 per cent and compounding a week of sustained losses in the run-up to the release of its numbers.
Adjusted pre-tax profit came in at £1.1bn, down from £1.6bn in the same period a year ago. Including the impact of charges from bad loans made in Ireland and compensation payments relating to the mis-selling of payment protection insurance, it lost £3.25bn. But overall impairment charges fell 17 per cent to £5.4bn.
The pattern was the same in the wider banking sector, where nascent morning gains failed to stand the test of trade and faded into sharp losses by the close. Royal Bank of Scotland was 6.1 per cent weaker at 30.28p. Barclays fell 7.8 per cent to 196p and HSBC was 2.6 per cent softer at 578½p.
Worries about the outlook for global growth hit mining shares, adding to the pressure on the index. Randgold Resources proved the exception as the gold miner climbed 6.6 per cent to £59.20 thanks to record bullion prices.
Unilever provided another bright spot, climbing 2.7 per cent at £19.57 after it beat forecasts for the second quarter, reporting underlying sales growth for the period of 7.1 per cent, ahead of consensus forecasts of 5.5 per cent. The consumer products maker’s performance was lifted by its emerging market operations. The Anglo-Dutch maker of Dove soap and PG Tips tea said turnover in the period had risen 4.1 per cent to €22.8m. Its underlying operating margin fell by 20 basis points, making a relatively limited impact as it passed on increasing commodities costs to consumers.
Andrew Wood, senior research analyst at Sanford C. Bernstein, said: “As we expected, Unilever delivered a good second quarter and first half, well ahead of consensus expectations on the top-line and, perhaps most importantly given investor worries, on margins too. We still believe that Unilever should be able to deliver positive margin growth for the full year.
Inmarsatwas the benchmark’s biggest single faller – tumbling 19.3 per cent to 394½p – after it cut revenue growth forecasts from its core mobile satellite services wholesale business.
Get alerts on UK equities when a new story is published