US financial fears send the FTSE tumbling

By MoneyhighStreet Staff. Published on August 19, 2008 This post currently has no comments.

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Fears about the state of the US financial markets and general concerns about the continuing global economic slowdown sent the FTSE 100 tumbling today (August 19th).

Overnight the markets in New York slumped, with mortgage companies Fannie Mae and Freddie Mac seeing their shares drop to their lowest levels in 20 years.

Fears that the US government could be forced to step in and nationalise the companies added to the slide, as did comments by former IMF chief economist Kenneth Rogoff, who suggested that a large US bank would fold in the next few months.

As a result, London opened down significantly and continued to fall through the day. It ended on 5320.40 - down 129.80 points.

Financial institutions in the UK were hit hardest, with Jeremy Batstone-Carr, head of private client research at Charles Stanley, explaining to Reuters: "The widening in US Libor … is very significant because it suggests that banks are under pressure to finance debt that they have to repay by the end of the year.

"Certainly, judging by the data that I have seen, the numbers are enormous which is going to leave the banks very constrained. The credit crisis is going to keep on claiming victims throughout the remainder of the year."

As a result, Barclays shed 5.4 per cent to 324.25; Royal Bank of Scotland lost 13.50 points to close on 215; HBOS closed down 7.35 per cent at 277.50; and Lloyds TSB dropped 18.50 points to 287.50.