Footsie dips into bear territory as fear grips City

Sellers took firm control of the world’s stock markets today, driving share prices down to levels not seen for more than three years and pushing London within a whisker of an official bear market.

The FTSE 100 index of leading shares fell 176.87 points, or 3%, to 5699.93. An official bear market would exist if it dropped below 5683.18, or down more than 20% on its most recent April 2015 closing high of 7103.98.

Brenda Kelly, chief market analyst at London Capital Group, said: “We’re only a hop skip and a jump from bear-market territory. To all intents and purposes, the FTSE is now in a bear market and should we close below 5700, a psychological level in itself, we may well see the 5620 level and even sub-5600 in a very short time.”

Japan’s Nikkei index entered a bear market proper today, having closed down 3.7%, with Hong Kong’s Hang Seng index not far behind, closing 3.8% lower. Japan’s prime minister Shinzo Abe (pictured) told its parliament that he would work to ensure a stable market in shares and bonds.

India’s so-called Nifty Fifty index of the country’s leading shares and Shanghai’s Composite index are already more than 20% below their peaks of last year and well into bear territory.

Today’s biggest casualties were again mining and oil stocks with Anglo American down 5.9%, BHP Billiton off 6% and Shell down 5.7%. Sentiment was not helped by Citigroup revising its forecast for average commodity prices in 2016 sharply down. It pushed its oil forecast down from $51 a barrel to $40 and nickel down by 22%.

The FTSE 100 has fallen on nine of the first 13 trading days of the year and has dropped by 8.5%. That has taken £13.6 billion in the value of shares in the FTSE 100 since the start of this year.

But David Buik, analyst at Panmure Gordon, remains cautiously optimistic: “Despite the carnage in the City and Canary Wharf today, this retrenchment is a healthy adjustment, aligning itself to lower global growth. I am not a prophet of doom!”

The pound dropped as low as $1.4130 at one point, the lowest it has been since March 2009. Esther Reichelt, currency strategist at Commerzbank, said: “Nothing seems to be able to stop the collapse of sterling. It might still take a while before the slide in the pound comes to an end.”

The rout in equity markets saw investors fleeing to safe-haven investments with German bonds and US Treasury bills in demand. German 10-year bond yields fell to their lowest since last May at 0.42%, while US Treasury 10-year bill yields hit 1.96%, their lowest since last October.

Gold rose $5.33 to $1094.8 an ounce.