Footsie retreats as US recession looms after economy shows signs of easing

FTSE: 5,584.51 (–133.88) Mid-250: 10,994.59 (–194.05) Small Cap: 3,157.37 (–69.17):UK STOCKS fell the most since November yesterday, as speculation mounted that the US will slide back into recession after the world's largest economy showed signs of slowing down.

The FTSE 100 fell 2.3 per cent, to 5,584.51 at the close in London, for the gauge’s largest retreat in more than eight months.

The benchmark measure has slumped 8.3 per cent since its peak this year in February on concern that Europe’s sovereign-debt crisis will spread to the larger economies of Spain and Italy.

“This week has been all about bad economic data coming out of the US,” said Joshua Raymond, a market strategist at City Index in London. “These have escalated fears of a big slowdown in the global economy, not just the US.”

Martin Feldstein, economics professor at Harvard University, said on Tuesday that the US economy was “balanced on the edge”. Mr Feldstein is a member of the Business Cycle Dating Committee of the National Bureau of Economic Research.

“There’s now a 50 per cent chance that we could slide into a new recession,” he said.

Royal Dutch Shell, Europe’s biggest oil company, dropped 3.6 per cent to 2,112.5p.

BP, Europe’s second largest, fell 2.2 per cent to 433p.

Tullow Oil, a London-based oil explorer, led retreating oil stocks across Europe. The company plunged 5.7 per cent to 1,146p, its biggest drop in more than two years.

Cairn Energy, a Scottish oil explorer, sank 5.1 per cent to 334.8p as it abandoned a well off the coast of Greenland after drilling failed to find oil.

Glencore International plummeted 7 per cent to 426.4p for the Switzerland-based commodity trader’s biggest decline since its initial public offering in May.

Mining companies slumped as metal prices dropped. BHP Billiton, the world’s largest mining company, fell 4.2 per cent to 2,121p. Rio Tinto declined 3.9 per cent to 4,015p.

Rexam soared 4 per cent to 368p, its largest gain in a year. The world’s biggest beverage can maker reported first-half net income of £132 million, compared with £102 million in the previous .

National Grid, operator of the UK’s power and gas networks, increased 1.2 per cent to 609.5p.

Vodafone, Europe’s third-largest phone company by sales, gained 0.9 per cent to 170.5p. – (Bloomberg)