FTSE plummets 2.2% on further macro fears

The FTSE slumped by 2.2% before recovering to close down 1.51% and sterling fell to a one month low against the dollar as further macro concerns rattled the markets.

The market was sent into a tailspin by new Monetary Policy Committee member Martin Weale, who said that the Bank of England’s growth forecast for this year and next could be too optimistic and investors should not rule out a double dip recession.

Sterling was down by almost 1% to $1.53, although it recovered later after another round of weak economic data from the US.

Figures released by the National Association of Realtors revealed an unexpectedly sharp drop in sales of previously occupied homes in July.

Purchases of existing homes slumped by 27.2% to 3.82 million, way below the predicted 4.6 million.

In mid-morning trading, the S&P 500 had fallen by 1.9%, while the Dow Jones Industrial Average dived by 1.7% to 9,999.43. The 10 year Treasury yield also took a hit, slipping below 2.5% for the first time this year.

Further volatility is likely this week with the US figures on durable goods orders, consumer confidence and the revised second quarter GDP all due out.

In the FTSE, oil and gas and mining stocks bore the brunt of investors' renewed concerns about the strength of the economic recovery.

Cairn Energy closed down 4.18% and BP was off 3.19%. Kazakhmys was down 4.01%,  Rio Tinto was off 4.21% and Verdanta a whopping 7.61%.