Analysts predict 'end of world as we knew it' as shares plunge

SHARE prices could be heading for levels not seen for 13 years, City analysts warned today, with the FTSE- 100 Index heading down towards the 3000-point level.

Almost £30billion was wiped off the value of British companies today as the London stock market slumped following a rout in the Far Eastern stock markets. Top British companies' share price have now fallen to levels unseen since the 2003 Gulf War.

City analyst Ian Scott of Nomura told his clients it was "the end of the world as we knew it".
Aviva, the owner of Norwich Union, tumbled more than nine per cent while rival Legal & General was down more than eight per cent.

Travel company Thomas Cook fell nearly eight per cent on fears that a consumer slowdown will force people to cut back on holiday plans. British Airways fell by more than six per cent even though falling oil prices will make its fuel bill cheaper. No sector has been immune to the slide in share prices. Over the last six months it has not been just banks and financial services companies' prices which have plummeted.

Transport, media, manufacturing and retail sectors all have their fair share of companies whose prices have more than halved in the last six months. Even conventionally safe areas such as mining and pub companies have not escaped.
Investors' fears were sparked in the Far East when Japan's Nikkei index fell by more than six per cent to close at its lowest for 26 years. The Hang Seng in Hong Kong dropped almost 13 per cent and the Manila stock market in the Philippines closed down 12 per cent.

In London, the FTSE 100 lost 116.72 to 3766.64, a decline of 3.01 per cent. That came on top of Friday's five per cent fall on the back of fears that the recession could be longer and deeper than many economists have forecast.

Ryan Kneale, market analyst at City bookmaker www.BetsForTraders.com said: "The markets are sliding down a slippery slope desperately trying to find a footing somewhere but so far nothing has held and we seem to be creating a new bottom almost daily.

"We would not be surprised to see another concerted rate cut announced this week if the situation does not show signs of improvement very soon."

Manoj Ladwa, of ETX Capital, said: "This is a market in search of a floor. Many investors thought that we had found one at about 4000. We've plunged well below that level now."

The FTSE-100 Index is now less than 500 points above the low of 3287 it hit in the spring of 2003 when insurance companies were forced to dump shares to satisfy strict new laws on how much capital they had.

Many analysts believe the share price graphs are pointing down below this level, taking prices to levels not seen since 1995. They believe share prices will fall further in order to complete the final leg of the "M" shape which is shown not just on the FTSE 100 chart but also on Wall Street.

That would drive share prices on both sides of the Atlantic to levels last seen 13 years ago.
Chartists, who analyse share price movements based on historical patterns made on graphs, believe prices and indices move in cycles.

In the current instance the formation of the "M" is a classic signal that share price must at least fall below the middle and lowest part of the "V" shape within the "M". That would happen if the FTSE fell 100 points a day for the rest of this week.

The pound tumbled against the dollar again, falling by more than five cents to its worst level for more than six years. In the last week the pound has lost more than 10 per cent, dropping by more than 18 cents.

Analysts believe the Bank of England will cut interest rates by another half a percentage point when the monetary policy committee meets next week.