£34bn wiped off UK shares

ANOTHER £34bn was wiped off the stock market value of Britain's leading companies today amid mounting concern about the fragility of the US economic recovery and more bad news from corporate America.

The latest City plunge saw the FTSE 100 index of leading shares go below the psychologically important 4000 mark on its way to closing the week lower for the third week in a row. It fell 148 points, or 3.5%, to 3936.9 before coming back to end down 76.9 at 4008.

After the FTSE languished in negative territory all morning, a disastrous profits warning from US communications equipment giant Lucent accelerated the slide. The firm said it expected a 20% to 25% drop in fourth-quarter revenues. The news came only hours after German telecoms group MobilCom said it would file for insolvency, triggering fears about banks' exposure to debtladen telecoms companies.

'The Lucent warning has just tipped the Footsie over the edge,' said one dealer. Worries that Iraq and the US are on a collision course were also feeding investor pessimism. 'Lingering in the background is the war issue, but the pressure is coming from the combination of economics going south and disappointment from the corporate sector,' said Bob Semple, equity strategist at Deutsche Bank.

US Federal Reserve chairman Alan Greenspan struck a downbeat note on the US economy, with latest data suggesting recovery from last year's recession is at risk. Although the Bank of England is widely tipped to leave interest rates at a 38-year low of 4% for the next few months, economists said a prolonged stock market slide and more bad economic news could force it to cut the cost of borrowing again by the end of the year.