FTSE falls after Wall Street sell-off

London equities fell in opening trade on Friday, after big losses on Wall Street overnight fostered further concern about the health of the US economy.

The FTSE 100 started the session 0.5 per cent lower at 5,872.5, a loss of 30 points led by oil and banking stocks. Mid-cap retailers pressured the FTSE 250, which lost 0.8 per cent to 9,648.9.

Wall Street screens were awash with red overnight, despite hopes for an aggressive fiscal action plan to ward off the threat of a recession . A closely watched survey of regional US manufacturing activity by the Philadelphia Federal Reserve, moved into recession territory and US bond insurers faced the threat of losing their triple-A ratings. The S&P 500 index ended down by 2.9 per cent at 1,333.3, its lowest close in 15 months.

The growing sense of uncertainty hit financial services stocks in the UK.

New Star Asset Management, a fund manager heavily exposed to the commercial property sector, crashed 88½p or nearly 40 per cent to 58½p, after warning this year's profits would be "significantly lower" than 2007 and cutting its dividend.

It added that its European mutual funds and some of its UK mutual funds were badly positioned for the combination of the credit squeeze and high natural resource prices in the second half of 2007. As a consequence, the majority of New Star's UK and European equity mutual funds significantly underperformed their peers.

Interdealer broker Icap was the biggest loser on the FTSE 100, down 3.9 per cent at 625p. Fund manager Schroders fell 4 per cent to 935p and Barclays (NYSE:BCS) was 1.6 per cent softer at 458½p.

Carphone Warehouse lost 3.2 per cent to 295p after it missed forecasts for the number of network connections it sold during the peak Christmas trading period, although it stood by its existing profit guidance for the full-year. Shares in the retailer lost 3.5 per cent to 294.3p.

News of further emergency engineering work at one of British Energy's ageing nuclear reactors, this time costing £50m at its Heysham plant in Lancashire, sent shares in the company 1.6 per cent lower to 511½p.

Oil companies stood out on the downside as crude prices stayed under $90 per barrel, trading at $89.16. BP lost 0.5 per cent to 551p, with Royal Dutch Shell 0.8 per cent weaker at £18.96. Cairn Energy lost 0.5 per cent to £24.88.

London's mining sector once more helped protect the market from wider losses. There was fresh rumours that BHP Billiton (NYSE:BHP) was preparing to sweeten its unsolicited offer for peer Rio Tinto. Shares in Rio rose 2.3 per cent to £46.04, whilst BHP rose 0.2 per cent to £13.50.