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Plunging Dow ends day of growing fears for economies.

FRESH fears for the global economy and more banking uncertainty wiped out some much-needed gains for the London market yesterday.

Under-pressure banks HBOS and Royal Bank of Scotland closed 31% and 5% higher in the wake of the Government bail-out but the wider market was hit by a weak opening on Wall Street.

The Footsie finished 1.2% down at 4313.8 - a fall of 52.9 points. It is the lowest finish since August 2004. And in the final minutes of trading last night the Dow Jones industrials index plunged 678 points, or more than 7%, to its lowest level in five years.

Iceland's deepening banking crisis also darkened the mood and the other major exchanges in Europe were also lower.

Although HBOS and RBS finished in the black, Barclays was London's worst performing blue-chip stock, down 13%.

There was speculation that the group, which is eligible to draw on some of the Government's pounds 25bn capital hand-out, may look to existing shareholders rather than the UK Government for any capital injection. Ministers have promised oversight on executive pay and dividend policy in return for any investments the Government makes.

HSBC also fell 2% after revealing it was beefing up its balance sheet by pounds 750m without any help from the Treasury.

David Jones, chief market strategist at IG Index, said: "The London market has had the wind knocked out of it by a slide on Wall Street.

"With the FTSE 100 edging back to the levels seen before all the central banks acted, it's left many people scratching their heads and asking what will it take to stop the slide."

New York's slide came after the Bush administration said it was considering taking ownership stakes in a number of the nation's banks, adding to the general uncertainty surrounding the financial sector.

HBOS' proposed merger partner, Lloyds TSB, managed to edge up nearly 1%. There were other notable share rises with some stocks bouncing back after yesterday's 5% plunge.

Marks & Spencer ended the day 6.25p higher at 226.75p, and British Airways - whose gloomy trading outlook has left shares under pressure in recent days - managed to rise 4.1p to 125p.

But there was evidence of economic fears playing on other retailers, with supermarket chain Morrisons and Thomson holiday firm owner TUI Travel 4%lower.The big energy companies were off-colour as oil prices remained at eight month lows, below EUR90 a barrel. BP slid 7.5p to 409.5p, with Royal Dutch Shell slipping 31p to 1412p. More economic gloom arrived yesterday in the shape of a 13% fall in house prices during the past year, according to Halifax.

The UK's trade gap in goods also remained at a record level in August, as exports failed to receive a boost from the cheaper pound, another downbeat economic update revealed. The difference between the UK's exports and imports was pounds 8.2bn in August, the Office for National Statistics said, much worse than the pounds 7.6bn expected by analysts.

Economists said it was further evidence that the UK economy had already slipped into recession, while the International Monetary Fund's chief also voiced fears over global prospects.
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Publication:Western Mail (Cardiff, Wales)
Date:Oct 10, 2008
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