Belfast Telegraph

Footsie rocked by big fall as fresh fears see stocks slump

The FTSE 100 Index suffered its biggest fall this year yesterday as US and European debt worries wiped £35bn from the value of blue-chip stocks.

Thomas Cook shares lost earlier gains on the FTSE 250 Index after it announced the resignation of chief executive Manny Fontenla-Novoa following four years at the helm.

He has paid the price for three profit warnings in a year and a rise in the company's debt level.

The stock had lifted more than 5% but was later down 1.3p at 59.5p.

Elsewhere, shares in retail chain Next were 4p lower at 2358p after it revealed a slowdown in sales and warned prices would be stagnant for at least a year.

The latest bloodbath for world markets also saw the Dow Jones Industrial Average decline for a ninth session in a row, while London's FTSE 100 Index was at its lowest level since November after slumping 2.3% or 133.9 points to 5584.5.

The slump was triggered by renewed fears that America's economy is heading for recession, fuelled by speculation that recently agreed budget cuts will damage the world's largest economy.

And new economic figures showed US services sector activity was lower than expected in July, while factory also orders fell.

In Europe, Italian and Spanish bond yields rose as investors viewed lending to both countries as more risky.

Italy's borrowing rates hit a new euro-era high as a global market sell-off reignited fears that the debt crisis will engulf the eurozone's third-largest economy.

Spain was also under the market spotlight, forcing Prime Minister Jose Luis Rodriguez Zapatero to delay his holiday by a day to monitor the bleak scenario in the markets.

The revival of the debt crisis is largely related to a global sell-off by traders of any investments that appear risky, such as the bonds of Italy and Spain.

Whereas both countries could continue borrowing at their current interest rates, their financing costs would increase, adding to the debt pile that is the source of market worries.

The fear is that the global market turmoil will push the two countries closer toward needing a bailout from European partners.