FTSE slumps after WorldCom collapse

City traders suffered yet more losses today as the FTSE 100 dived below the crucial 4000 barrier and disgraced US telecoms giant WorldCom filed for bankruptcy.

WorldCom filed for protection from its many creditors last night in what is by far the biggest insolvency in history, with debts of $41 billion. Its problems were triggered by an accounting scandal over £2.5 billion in improperly booked expenses and monstrous debts which caused a collapse in its share price.

WorldCom's creditors include giant banks JP Morgan, which is owed £11 billion, Citibank, owed £2 billion, and Bear Stearns, due £1.8 billion. On a smaller scale, among those who have lost out are British institutions including Abbey National and Barclays.

The Footsie slumped nearly 125 points to 3973.4 in early trading today as investors played catch-up from Friday's near-400 point hammering on the Dow Jones Industrial Average in New York. But the atmosphere soon calmed on this side of the Atlantic and shares managed a partial rally, leaving the Footsie down 88.4 points at 4009.9.

Steve Graves, senior dealer at Gerrard stockbrokers, said: "Some reckon we could have another 10 per cent or 20 per cent fall to go. But I think we could be close to the end of the low."

Concerns about corporate America grew over the weekend as further evidence emerged of unusual accounting practices at drugs giant Johnson & Johnson and unorthodox share dealings of former AOL Time Warner chief executive Robert Pittman, who quit last week after cashing in shares worth £47 million before he left.