The FTSE 100 index of Britain’s most valuable companies fell by more than 2 per cent yesterday as fears of a looming recession worsened.

Shares in the consumer goods, banking and commodity sectors were big fallers as grim consumer confidence data was compounded by discouraging corporate news, the falling value of the pound and data from Nationwide that had shown British consumer confidence in August stuck at its lowest level since 2004. Sterling’s slide continued as it hit a 12-year low against a basket of currencies as traders fed on fears of an imminent recession. The FTSE 100 closed down 121 points at 5,499.7.

Pub chains were hit hard amid consumer fears and news that Punch Taverns, down 38½p to 278¼p, would cut its dividend. Enterprise Inns fell 27p to 280¼p.

Retailers were under pressure, with DSG International, owner of Currys and PC World, reporting a 7 per cent fall in first-quarter sales and saying that it remained “very cautious” about the consumer outlook. DSG ended the day up 4¼p to 57p, but J Sainsbury fell 15p to 355p, Next slipped 41p to £10.92 and Kingfisher was 5.1p down at 135.6p.

Banks were not spared, ahead of the Bank of England’s interest rate decision today, with Barclays, down 13½p to 350¼p, also hit after Royal Bank of Scotland analysts downgraded the stock to “sell”, from “hold”, giving warning that Barclays had “substantial near-term balance sheet concerns to overcome”. Royal Bank of Scotland fell 4½p to 237p and HBOS was 6¾p off at 303¼p. Bank investors were also cautious that the European Central Bank will announce today the closure of its discount lending window.

Miners and petrochemical stocks lost ground tracking weakening commodity prices. Ferrexpo was the index’s heaviest faller, down 38¼p to 211¼p. BG Group fell 72p to £10.47.

Lonmin, the platinum producer, fell 15p to £34.17, as the Takeover Panel set a deadline of October 2 for Xstrata, down 93p to £27.11, to state a firm intention to buy the company or walk away.

BP fell 5½p to 506p, despite Goldman Sachs analysts upgrading the oil group to “buy”, from “neutral”, saying that the oil sector had been sold off too hard in recent weeks. The stock also received support from reports that an initial flyover of its oil and gas platforms in the Gulf of Mexico after Hurricane Gustav had revealed no big structural damage or signs of oil leaks.

Vodafone’s shares fell 2.6p to 141.6p after Credit Suisse analysts downgraded the stock to “neutral”, from “outperform”, saying that the company was likely to miss sales targets.

British Airways fell 10¾p to 262½p after the airline said that failing oil prices were providing little relief because its fuel bill was being inflated by a weaker pound. The comments came as the airline reported that passenger growth fell in August and that its aircraft were less full.

BAE Systems, up 2¼p at 485¼p, led a group of only three blue-chip stocks to end higher, with British Energy up 3p to 735p amid talk that EDF, the French utility, was closer to making a sweetened bid. 3i rose 1½p to 923½p.

New York: Wall Street stocks closed 16.00 points up after a skittish day as signs of sluggish growth in the world economy left investors worried. The Dow Jones industrial average ended the day at 11,532.90.

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