/www.thisislondon.com/ THE FTSE 100 index of leading shares crashed to its lowest close for nearly eight years while the pound and dollar headed to four-year lows against the euro as war worries and fresh concerns about the US economy smashed investors‘ confidence.
London's blue-chip share index slid after Wall Street stocks opened sharply lower. Traders said investors were mostly reacting to the apparent intensification of United Nations wrangling over the weekend's Anglo-American proposal to set a 17 March deadline for Saddam Hussein to disarm or face war.
Sterling was particularly damaged by growing signs of a rift within Tony Blair's Cabinet after the resignation threat from international development secretary Clare Short.
Shares were suffering across the globe, with Japan‘s Nikkei Average tumbling to 20-year lows, the German Dax index slipping more than 3% to seven-year lows and the French CAC 40 index sliding 2%. The Footsie fell 55.6 to 3436, its lowest close since July 1995.
'Investors are taking the view 'do nothing until the war's over',' said one trader, adding that hedge funds had been shorting the market — selling shares they do not already own. Mark McCutcheon, head of dealing at Gerrard stockbrokers, said: 'I can still see us hitting 3200 or 3300 in the next couple of weeks. The war is the key.'
Among corporate issues bedevilling Wall Street were General Electric's $5.25bn (?3.3bn) pension deficit and a $2.5bn accounts restatement by drugs giant Bristol-Myers Squibb. Investors were also spooked by a warning from the St Louis Federal Reserve Bank that US housing market lenders Freddie Mac and Fannie Mae were vulnerable to a financial shock that could damage the US economy.