FTSE plunges as Republicans bid to block US bail-out plans

THE FTSE-100 Index tumbled below the 4000 barrier today as traders sold shares across the world.

London shares fell more than 200 points in the last few minutes of trading last night as Wall Street fell heavily. Overnight, the Asian markets followed suit and traders in the City continued the trend with the Footsie falling 86.42 at 3919.26.

That was the lowest point since 24October, cancelling out the rally inspired by the massive interest rate cuts from the Bank of England that took shares up to 4645 earlier this month.

Investors are fretting about the outlook for the global economy as the recession which started in America spreads to Europe and Asia. Fears over the US are growing rapidly as Republican politicians look set to block a taxpayer-funded bail-out of its giant car manufacturers, who face likely collapse with the loss of tens of thousands of jobs.

Today's shares slide took in sectors ranging from banking to mining and property - all industries affected by global economic conditions.

Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said: "There is a hangover from Wall Street last night.

"The markets are very much on the back foot over concerns about deflation in the US economy and also a great deal of uncertainty surrounding the future of the big US car manufacturers.

"In the UK, there is still considerable uncertainty surrounding the banks, the level of lending to consumers and business, and we have the pre-Budget report to come on Monday so there is a great deal of anticipation ahead of that."

The jittery state of the economy was highlighted by yet more job cuts today.

Rolls-Royce is to shed 2,000 worldwide, drugs group AstraZeneca is cutting 250, Deutsche Bank is losing 900 in London and Wall Street, and fund manager Fidelity is axeing 300 in the UK. More than 20,000 jobs have been cut by British firms in the past two weeks.

The collapse in share prices has wiped billions of pounds of the value of British pension funds, which are among the biggest investors in the stock market.

Among sectors that have been hit especially hard is the high street, where shops have suffered from the collapse in consumer confidence.

This week giant retailers like Debenhams and Marks & Spencer launched big price cuts in the hope of getting shoppers through their doors.

Retail bosses fear that if they do not offer discounts now, they will be stuck with piles of unsold goods that have to be shifted at a huge discount in the post-Christmas sales.

Official figures today highlight the huge decline in high street sales.

The Bank of England's 1.5 per cent interest rate cut earlier this month could go some way towards boosting people's spending in the shops.

But M&S chief executive Stuart Rose today cautioned against further dramatic cuts which he warned could "spook" people and stop them shopping altogether.

"We've gone past the poor sentiment stage," said Miles Remington at BNP Paribas. "People are looking for any kind of positive and there are just no positives out there.

"Everyone seems to be united in the depressed global outlook. Whether it's commodities or equities, everything seems to be on a downturn."

The pound was also falling heavily again today, down two cents against the dollar at $1.488. Just last August the pound was worth more than $2.