Tokyo fear infects Dow and Footsie

REVIVED fears of a double-dip recession left world stock markets flat on their back. The rot set in overnight in Tokyo with the Nikkei plummeting 304 points to a 19-year low. A few hours later and the doom and gloom spread to dealing rooms in London. With hardly a buyer in sight, the

Wall Street returned from its Labour Day holiday and soon found itself almost 300 points lower. It failed to recover and ended 355 points down at 8308.

Fragile confidence was further hit by a weaker-than-expected Institute for Supply Management manufacturing index for August - unchanged on July's 50.5 level - which increased concerns about the pace of the US economic recovery. Bears roared it is grinding to a halt.

Ongoing worries about a US military attack on Iraq, the forthcoming anniversary of September 11 and a major earnings downgrade of Intel by broker Lehman Bros ahead of tomorrow's third-quarter figures were other reasons why investors remained firmly entrenched in their bunkers.

Markets are clearly now anticipating just about every bit of bad news imaginable. Optimists believe that share prices have already fallen far enough and when the rally comes, it will be vicious.

Giant investment company 3i Group reflected the market's malaise with a fall of 42 1/2p to 527p. Reports that Swiss insurer Zurich Financial Services is to raise £1.6bn in a rights issue to shore up its battered balance sheet kept insurance in the doghouse. Friends Provident lost 9p to 136 1/2 p, Prudential 20 1/2p to 469 1/2p and Royal & SunAlliance 3 3/4p to 114 1/4p.

Halifax did mortgage banks no favours by stating that the UK housing market is showing early signs of a slowdown. Abbey National cheapened 17 1/2p to 705p, Bradford & Bingley 13p to 305p and Northern Rock 16 1/2p to 701p. HBOS touched 667p before closing 26 1/2p off at 685p after Merrill Lynch downgraded from buy to neutral.

Oils fell away in sympathy with the October Brent crude price, which dipped 30 cents to $27.26 a barrel after Iraq said it would be willing to work with the United Nations to help resolve the stand-off between Baghdad and Washington.

British Petroleum dived 31p to 468p, BG Group 16 1/4 p to 253 1/2p and Shell 28p to 406p. Aggressive selling on growing concerns that it could splash out £9bn on French mobile group SFR left Vodafone 6 1/2p down at 93 1/4p. mmO2 shed 3p to 44 1/4p and British Telecom 10 1/2p to 188 3/4p. Thanks to analysts at Bank of America, drugs giant AstraZeneca proved resilient, soaring 63p before closing 7p better at 1895p. They reckon all the negatives are now in the price. Their target price is £25.

Hopes that BhS multi-millionaire Philip Green will go-it-alone and relaunch his bid of £770m plus 408p a share cash bid for the Top Shop-to-Miss Selfridge group before the end of the week helped Arcadia rise 5 1/4p to 378 1/2p. Continuing speculation about a management buy- out lifted JJB Sports 4p to 196 1/2p.

Capital Radio fell 55p to 475p. Early morning listeners will surely leave in their droves when ace disc jockey Chris Tarrant parts company with the breakfast show later this year. After 15 years he wants to spend more time with his family.

Following completion of its £2m acquisition of nightclub group Finlaw, Mean Fiddler improved 2p to 26 1/2p. Finlaw's Harry Lambert joins the board.

Biotech minnow Vernalis jumped 20 1/2p to 52 1/2p after announcing that its frovatriptan anti-migraine treatment helps to prevent menstrually associated headaches. Provalis, the maker of medical machines and diagnostic products, edged up 1p to 8 1/2p. The first- quarter has started well with healthy sales and orders. Osmetech, the developer of electronic odour sensors, nosedived 2 1/4p to 2 3/4p. It is raising £5.43m via a placing at 2p to help provide fresh working capital.

A sharp decline in first-half profits left Brandon Hire 9p down at 64p.

SUPPORT services group Mears certainly has a big City following. About 18 analysts attended yesterday's presentation at which chairman Bob Holt reported record interim profits, up 31% to £1.58m, and a record £267m order book . There is £4m cash in the bank for acquisitions. Broker Old Mutual has pencilled in £3.5m for the full year and says buy the shares at 76 3/4p, up 1p.