No joy for City as Footsie slides

THE FTSE 100 index crashed through the 5000-points barrier as investors swapped their Jubilee joy for renewed concerns about more corporate scandals. The leading market lost 84.5 points to 5000.6, its lowest since the sell-off after 11 September. The market has now seen its total value slashed by about £280bn since its peak on 30 December 1999.

Analysts blamed the plunge on the poor performance of Wall Street's Dow Jones Average, which has lost 385 points in the past week, the tax evasion charges against former Tyco chief Dennis Kozlowski and tension surrounding the India-Pakistan stand-off.

There were also worries that the market's slide through the 5000-points barrier would trigger panic selling as investors hunted for the next key support level. 'The 5000-points level has been a robust one since November and there are now worries that we could be looking at 11 September numbers,' said Deutsche Bank equity strategist Bob Semple. The FTSE plumbed a low of 4433.69 after the New York attacks but recovered to 5200 by mid-October.

However, Semple said the latest sell-off was not justified by the improving economic outlook, particularly in the US, and he believed the market would rise to about 5600 by the end of the year.

The Footsie's fall came despite widespread expectations that the Bank of England's monetary policy committee will keep interest rates at a 38-year low of 4% when its latest meeting concludes at midday on Thursday. But the decision is unlikely to be clear-cut, with the economy pulling in two different directions and some on the MPC possibly voting for higher rates.

The recent shock downward revision to first-quarter gross domestic product left the economy registering no growth at all for six months. The manufacturing sector is still mired in recession and hopes of a bounceback have so far failed to materialise. But High Street spending is rampant and the housing boom is showing no sign of slowing.

Flagging economy puts MPC in hold mode