As consumers’ wallets tighten, credit dries up and fewer people move house, buying a new computer or television slips down the household agenda, which is bad news for DSG International.

In a retail sector hit yesterday by consumer spending fears, the Currys and PC World owner was among the biggest sufferers after JPMorgan downgraded the stock, noting that the macro environment in all its core markets would continue to deteriorate. The broker said that it believed that gross margins in the UK in particular would remain under pressure, with retailers struggling to maintain prices as the slowdown in the housing market hits white goods sales.

Analysts also expressed concern that the group may come under pressure from TV promotions from competitors, particularly for laptops as children go back to school, as Argos enters the market and Carphone Warehouse expands its offering. It has cut 2008-09 profit forecasts by 10 per cent and by 16 per cent for the year after.

Worse still, JPMorgan noted that although DSG’s shares have rallied 86 per cent since June 7, on hopes that it could ease its financial situation by selling assets and with recent market rumours suggesting a break-up, the hopes were misplaced. It added that unlike Kingfisher, the DIY retail group, which recently sold its underperforming Italian business for €560 million (£447 million), DSG’s Spanish and Italian operations were less valuable, as they are leasehold, loss making, and operate in markets that are likely to remain challenging for some time.

Instead, the broker thinks that the company is more likely to invest in them to close or restructure. Comments from Pali International that DSG looked “very overvalued,” combined with the stock going ex-dividend, meant the company’s shares fell 10¼p, or 15.8 per cent, to 54½p.

Marks & Spencer lost 29¾p to 266¼p, after Redburn downgraded it to “sell”, on concerns that its food market share is declining while growth falters for Per Una fashions. Consumer spending fears also hit Kingfisher, down 13.8p to 124.6p, and Next, 89½p lower at 990½p.

Overall, the FTSE 100 index lost 85.9 points to 5,448.6, hit by comments from the Bank of England that it did not expect the UK economy to grow at all over the coming 12 months and official figures showing the biggest jump in UK unemployment for more than 15 years. Banks, also unsettled by losses at JPMorgan on Tuesday stoking fears that they may be forced to raise more money, suffered with HBOS falling 24p to 307p, Barclays losing 27p to 351½p and Royal Bank of Scotland down 15¾p to 229¾p.

A better day for metals prices had miners leading the index, with Anglo American up 112p to £27.91 and Kazakhmys rising 39p to £12.05.

Capital & Regional, the property investor, gained 9½p to 185½p, after it confirmed reports it was in talks, believed to be with Apollo Real Estate, to sell a stake in its €668 million German portfolio.

Imperial Energy advanced 93p to £11.37 on reports that it could be sold within days, with China’s Sinopec and India’s ONGC the most likely buyers.

— New York: Fresh concerns about the growing impact of the mortgage crisis on the US economy hit financial shares. The Dow Jones industrial average closed down 109.50 at 11,533.00.

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