FTSE falls again

24-08-2006

The FTSE 100 index fell 2.4 per cent yesterday, as fears over the weakening US dollar, depreciating consumer confidence and rising oil prices and inflation rocked markets across both sides of the Atlantic.

In London the FTSE sank 139 points to 5652, erasing Friday's 113-point rebound.

The market has experienced a great deal of volatility over the past fortnight, dropping ten per cent from a five-year high only to rally 2.4 per cent last week, the biggest weekly gain since November.

Bourses across Europe also experienced heavy falls with the Paris market losing more than 130 points and Frankfurt down by over 120 points.

In the US, the Dow Jones index fell 107 points to 11170.87, with rattled investors rushing to sell stocks as crude oil prices passed $72 and a report from the US Conference Board said consumer confidence had fallen sharply in May, despite a four-year-high in April.

The dollar subsequently suffered its largest one-day fall against the euro in six weeks.

Traders across the globe are concerned that the US economy is overheating and that rising oil and commodity prices will send inflation higher, forcing central bankers in America to raise interest rates.

Such a move would increase higher borrowing costs for companies and affect their profits, with investors subsequently likely to sell up corporate shares and move their money into fixed-rate investments such as bonds.



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