The FTSE 100 index has lurched deeper into eight-month lows after a big fall on Wall Street following some surprisingly soft US retail sales data, suggesting a cooling off by consumers who until now have been seen as underpinning economic recovery.
By 8.45 a.m. the blue chip UK index was down 100.5 points or 2.1 per cent to 4,671.4, its lowest reading since the end of September last year when prices were shooting back up from the post September 11 low of 4,220.
The index has now lost around 245 points, or some 5.1 per cent, over the week and market watchers see no respite as investors sink into gloom about the outlook for economic recovery and the prospects for British interest rate rises.
"It's down for the very simple reason that US retail sales were off," said Ms Tamzin Hobday, director of pan-European strategy at WestLB Panmure.
Traders said sluggish US retail sales data called into question the pace and extent of a recovery, which many have been hoping would boost company fortunes and spur market gains.
"There is concern that the Bank of England is going to raise interest rates in July and that's overhanging the market. Global economic recovery just doesn't seem to be there... the recovery that people are talking about isn't going to happen until next year at the earliest," she added.
Mobile giant Vodafone dived five per cent to 90p, hurt by news its Japanese J-Phone unit had raised subsidies on about half the handsets in the Japanese market in response to competition.
Financials took another hit with banks showing Barclays down 1.9 per cent and HBOS off 3.2 per cent, jittery after comments from the Bank of England yesterday warning of rising interest rates.