The Dow Jones industrial average fell by 213 points, or 2%, to 10,667, its biggest one-day loss since March 2003. The drop wiped out all the stock market’s gains for this year, leaving it 50 points down on its 2005 close. The Nasdaq index of mainly technology shares also took a pounding, falling by 54 points, or 2.4%, to 2,247.
The fall, which reflected disappointing fourth-quarter earnings from General Electric and Citigroup, and a renewed rise in oil prices to nearly $69 a barrel, followed days of nervousness after a plunge in the Tokyo stock market. Shares in Google fell 8.5%, to just under $400.
Analysts said the nervousness was bound to carry over into London trading tomorrow. The higher oil price, sparked by tensions over Iran’s nuclear programme, supply disruptions in Nigeria and the latest taped warning from Osama Bin Laden, will add to concerns.
New reports on Britain’s economy say it was already heading for a turbulent time. The Ernst & Young Item Club, which uses the Treasury model, predicts an upturn in growth to 2.3% this year from last year’s 1.7% but warns the economy is “not out of the woods yet”.
Deloitte, in its latest economic report, predicts growth of 2% this year. It warns that higher oil prices could have damaged the economy’s growth potential as well as threatening the global economy.
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The Institute for Fiscal Studies will release its green budget. It is set to say higher taxes are needed, probably of £2 billion to £3 billion, despite last month’s hike in North Sea taxation and the prospect of slower growth in public spending.