Blue-chip shares plunged on both sides of the Atlantic yesterday as mounting fears of a consumer-led recession in America inflicted another wave of losses on equity investors.

Stock markets succumbed to another vicious sell-off in New York and London after figures that were much worse than expected showed that retail sales in the United States had tumbled by 0.4 per cent last month, inflaming anxieties that fretful American consumers will go into a full-scale retreat.

In London, the FTSE 100 index plunged by 3 per cent, shedding 190.1 points to close at 6,025.6, registering its biggest daily percentage fall and its worst close since the money market crisis erupted in August last year.

On Wall Street, the Dow Jones industrial average sank by 277 points, or 2.17 per cent, to close at 12,501.1and the broad-based S&P 500 index of blue chips lost more than 2 per cent. Shares also suffered steep losses across Europe, sliding to 15-month lows.

A headlong flight by investors to the safe havens of government securities sent prices for US Treasury bonds soaring, driving their yields sharply lower. Yields for benchmark US ten-year Treasury notes fell as far as 3.78 per cent, their lowest in nearly four years.

The grim news about US retail conditions came on the heels of what increasingly gloomy investors have seen as other harbingers of recession — notably, a sharp jump in last month’s US unemployment rate to 5 per cent, from 4.7 per cent in November.

“It is looking like the US is sliding into recession, there’s no doubt,” Peter Dixon, of Commerzbank in London, said. Markets will look to Ben Bernanke, Chairman of the US Federal Reserve, to offer reassurance with fresh signals of imminent interest rate cuts in testimony to Congress tomorrow.

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