FTSE back below 5,000 on weak Chinese data

The FTSE 100 fell sharply in opening deals as European debt worries, weakness on Wall Street and worse than hoped for Japanese and Chinese data all added to fears about the prospects for the global economy.

The main UK index was down 88 points, or 1.76%, at 4981.

In the US, the DJIA closed the day down 5.29 points, or 0.05%, at 10138 as the euro continued to fall ahead of more European government bond auctions this week and amid rising fear of deflation across many Western economies.

In Asia, the Nikkei closed down 123 points, or 1.27%, at 9570 after weaker-than-expected industrial production, household spending and unemployment figures in Japan. 

A sharp downward revision in China's leading indicators (0.3% in April from 1.7% initially reported) and rumours that PMI will come in below expectations dragged the Shanghai Composite index lower for a fifth consecutive day.

The index fell 4.27% lower - to levels not seen since April 2009.

In the foreign exchange markets, the euro is still being pressured about the level of debt in southern European countries like Spain and Greece.

A number of Spanish banks have criticised the European Central Bank’s decision to demand repayment of €442 billion of loans on Thursday - especially as the Bank of International Settlements warned yesterday that government debt restructurings are a real possibility if the market loses confidence.

The euro was 0.37% lower against the dollar at $1.2230. The pound was 0.2% lower at $1.5064 having hit its highest levels since September last year against a basket of currencies yesterday. 

The yield on 10-year US government bonds has dropped to its lowest level since April 2009 at 2.9741% - a further sign of investor worry.

The Bank of England will publish consumer credit and mortgage lending numbers later and consumer confidence data is due in the US - all of which will be scoured for further clues on the strength of the recovery ahead of the all-important US non-farm payrolls on Friday.

On the corporate front, miners were nine of the ten largest fallers as the economic worries took their toll.