Argos and Homebase claim to undercut the competition on the high street but that still may not be sufficient to save both from what is expected to be a dire Christmas trading period.

That was the verdict of Goldman Sachs, which cut its target price on Home Retail Group, the FTSE 100 parent group of both businesses, from 327p to 283p. Goldman is worried about the deterioration of consumer credit, lower levels of disposable income and declining property prices.

Home Retail was the second-biggest faller among blue chips, down 19p to 311p. Kingfisher, the owner of the B&Q chain, fell in sympathy, down 6.9p to 147.7p.

The FTSE 100 ended down 119.2 at 6,277.9, leaving the index less than 100 points above where it started the year.

Fashion retailers felt the pinch as Next slipped 75p to £16.02. Debenhams was one of the worst performers in the FTSE 250, off 5¾p to 75½p, its lowest since being refloated last year. Seymour Pierce has cut Debenhams from “outperform” to “hold” and Next from “buy” to “underperform”.

Fears about retail spending hit shares in Liberty International, Britain’s largest shopping centre owner, as its shares fell 54p to £10.20.

Employers group CBI joined the general economic gloom by down-grading its 2008 economic forecast, its third revision this year, because of continuing credit market difficulties, a high oil price and weak domestic and global demand.

Spending on holidays and leisure is often the first casualty in harder economic times. That was the logic for falls in British Airways, down 17½p to 302½p, and InterContinental Hotels, down 38½p to 892½p.

Worries about the speed of global economic growth next year hit mining stocks, already feeling the chill from reports forecasting that the bull run of the past three years for commodity prices was at last coming to an end.

Vedanta Resources shed 110p to 199p and Kazakhmys gave up 60p to £12.50. The sell-off affected Xstrata, which last week said it had received a number of takeover approaches, as it fell 140p to £34.57. Rio Tinto, down 164p to £50.12, has said it will invest $793 million (£393 million) to expand the Kestral coalmine in Australia as part of an internal growth plan to frend off a takeover approach from BHP Billiton, down 67p to £14.78.

Tobacco and the food and drinks industries were the only beneficiaries of yesterday’s sell-off as investors scrabbled to find sectors that are highly cash-generative and largely immune from a downturn in consumer spending.

BAT gained 25p to £19.27 while Imperial Tobacco rose 42p to £26.19. Unilever, the food brands owner, added 6p to £17.61. Even Tate & Lyle, the sugar maker whose Splenda sales have disappointed this year, added 6p to 430¼p but the shares are still barely half what they traded at a year ago.

The drugs industry is normally another safe haven in straitened times. GlaxoSmithKline, however, nursed a 29p fall to £12.94, after a delay to the launch of its Cervarix cervical cancer vaccine in the US.

New York: Wall Street extended last week’s losses as investors remained sceptical that a special Federal Reserve credit auction will solve problems. The Dow Jones industrial average fell 172.60 points to close at 13,167.20

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