UK markets open in 3 hours 55 minutes

Recession fears sends FTSE 100 plummeting

By Simon Neville, PA City Editor

The boost to stocks and shares around the world earlier in the week was short lived by Wednesday, as traders dived for cover and the talk of recession increased.

Weak economic figures from Germany and China, with the former seemingly heading for a recession after revealing a 0.1% contraction in the second quarter of the year, spooked the FTSE 100.

The index closed the day down 103.02 points, a fall of 1.42%, to 7,147.88.

The German Dax and French Cac fared worse, closing down 2.19% and 2.08% respectively.

Tensions in the market were also raised as the US and UK both saw inverted yield curves, where short term Government bonds pay out more than longer term ones, which the City tend to see as a sign of troubles to come.

Connor Campbell, financial analyst at SpreadEx, said: “If the warning signs of second quarter contractions in the UK and Germany weren’t enough, this inversion, which last appeared as a harbinger of the financial crisis, caused investors to seriously chew over the idea that a recession is approaching. Predictably, this translated to some rather nasty losses.”

Add to that the ongoing China-US trade tensions, Hong Kong unrest and Brexit, and most traders struggled to find much to be positive about.

The smallest ray of sunshine was the 0.29% increase in the pound versus the euro, with £1 worth 1.0826 euros.

The pound was flat against the dollar at 1.2061.

Analysts put the boost down to the better-than-expected UK inflation figures released on Wednesday morning.

Even the oil markets struggled, following new data in the US that inventories of oil were about 3% above the five-year average for this time of year, according to the Energy Information Administration.

Brent Crude fell 4.24% to 58.70 dollars a barrel.

In company news, insurance giant Prudential confirmed it will spin off its UK and European arm by the end of the year as it posted a hike in half-year profits.

Investors were impressed, despite the ongoing tensions in Hong Kong where Pru has a large presence, with shares closing up 61.5p at 1,434.

Profits at car dealership Lookers slumped in the first half of the year as sales of new vehicles in Britain continued to decline.

New car sales were down 1.2% on a like-for-like basis, though this was still stronger than the market average of a 3.4% decline, leaving shares to close up 2p at 46p.

Sports Direct has announced that auditor Grant Thornton is set to quit its role working for the retail giant and could have a new one appointed by Government after the Big Four appeared to rule themselves out of working for Mike Ashley’s business.

Shares dropped 23.8p to 214p.

And car insurer Admiral revealed a £33 million hit due to reforms to personal injury compensation and warned that the total impact could be as much as £60 million.

But despite the warning, shares closed up 83p at 2,115p thanks to a bullish outlook by the company.

As a result, it meant Admiral was the biggest riser on the FTSE 100. It was followed by Direct Line, up 3.6p to 296.2p; Unilever up 60p to 4,967p; United Utilities up 9p to 774.2p and Severn Trent up 17.5p at 1,978p.

The biggest FTSE 100 fallers were Melrose down 9.95p at 162.95p; Evraz down 29p at 527.4p; NMC Health down 92.5p at 1,801.5p; Ashtead down 99p at 2,071p and TUI down 35.2p at 775p.