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FTSE 100 slides on US rate rise worries FTSE 100 slides on US rate rise worries
(about 4 hours later)
(Open): The UK market opened sharply lower, echoing a slide in Asian stocks, amid fears the Federal Reserve could raise US interest rates next week. (Noon): The UK market joined in a global sell-off, triggered by fears that the Federal Reserve could raise US interest rates as soon as next week.
Friday's comments from Boston Fed president Eric Rosengren that higher rates are needed to stop the US economy overheating have rattled markets. Markets were rattled by Friday's comments from Boston Fed president Eric Rosengren that higher rates are needed to stop the US economy overheating.
Shortly after trading began, the benchmark FTSE 100 index was down 95.01 points, or 1.4%, at 6,681.94. By midday, the FTSE 100 was down 100.61 points, or 1.5%, at 6,676.34.
Mining companies saw big falls, with BHP Billiton and Glencore down 4%. Stock markets in Paris and Frankfurt were down by about 2%, and this followed similar falls in Asia.
Shares in Associated British Foods fell 4.1% after the company said sales at its Primark discount clothing chain had been affected by unseasonable weather. "Markets have endured heavy selling so far today, as Friday's rout extends across into the new week," said Chris Beauchamp, chief market analyst at IG.
The company said like-for-like sales - which strip out the impact of new stores - are expected to fall 2% this year, after being hit by warm weather in the pre-Christmas period and very cold weather in March and April. "Investors have been reminded what volatility looks like, after sailing unperturbed through July and August.
In the FTSE 250, shares in private equity investor SVG Capital jumped 15% to 653p after it received a takeover offer from US firm HarbourVest Partners. "The sudden return of market volatility (which, as usual is a substitute for 'markets go down') has caught many napping, but this rally has seen many such periods and yet has bounced back each time. Of course this one could be different, but history would seem to indicate otherwise."
Takeover offer
The biggest faller on the FTSE 100 was Associated British Foods (ABF), which dropped nearly 9%.
The company sales at its Primark discount clothing chain had been affected by unseasonable weather, with like-for-like sales at the chain likely to fall by 2% this year.
In addition, ABF said its pension scheme was set to hit a £200m deficit, against a surplus last year, which it blamed on a "marked decline in UK long-term bond yields".
Neil Wilson at ETX Capital said the pension deficit was "a concern", adding that the change "chimes with what we're seeing elsewhere as record low bond yields are wreaking havoc with company pensions".
In the FTSE 250, shares in private equity investor SVG Capital jumped nearly 15% to 650p after it received a takeover offer from US firm HarbourVest Partners.
HarbourVest said it had offered £1.02bn for the UK firm, with shareholders set to receive 650p a share.HarbourVest said it had offered £1.02bn for the UK firm, with shareholders set to receive 650p a share.
On the currency markets, the pound edged up 0.1% against the dollar to $1.3276, but fell 0.2% against the euro to €1.1790. On the currency markets, the pound was flat against the dollar at $1.3261, and was also little changed against the euro at €1.1820.