Early optimism that the British market might recover from its Asian-related unhappiness was sweet but brief.
The FTSE 100 index performed strongly in the first half hour of trading and was up almost 50 points shortly after 9 a.m.
Then, however, the market began to consider the latest gross domestic product data from Japan and realised the economy was in worse shape than at any time since the mid-1970s. Also, the Japanese yen continued to be weak against the dollar, hovering around an eight-year low and threatening to provoke devaluations in the Chinese and Hong Kong currencies.
Even though British exposure to Japan and the rest of Asia represents only 7 per cent of overall profits, the Footsie swung down in a 150-point arc before stabilising a little towards the end of the session when it closed a net 82.7 lower at 5,769.8.
Only 16 Footsie stocks showed a net gain over the day and at the closing level, Footsie had suffered a fall of 269 points or 4.5 per cent over the past four days. The FTSE 250 dropped 55.8 to 5,861.2 and the SmallCap fell 11.4 to 2,756.0.
Persistent speculation of further consolidation in pharmaceuticals was unable to stem the overall selling. And some support was removed from the FTSE 250 shortly before the close when Vaux announced it had pulled out of bid discussions.
Another concern showed itself in the derivatives market where the contract on the Footsie was 75 points below its estimated fair value after the close.
