Wall Street stocks fell at the start of trade today as gloomy unemployment claims data added to grim forecasts over last night's jobs forecasts from the US Federal Reserve, stamping out hopes for a swift recovery from the recession.

The Dow Jones industrial average plunged by almost 130 points to 8,292.13 at close in New York as new claims for unemployment benefit dropped to a worse-than-expected 631,000 in the past week. Continuing claims for jobless benefits rose by 75,000, pushing the insured unemployment rate to 5 per cent, the highest level since 1982.

In the UK, banks, miners and oil companies were the biggest victims in a plunging FTSE which was sent reeling from a threat to downgrade Britain's credit rating from Standard & Poor's (S&P).

S&P cut its outlook on the country to “negative” from “stable” and raised the prospect of a downgrade to the UK’s current "triple A” credit rating, sending the FTSE 100 down 2.75 per cent lower at 4,345.47 points. It also emerged that public debt soared to £8.5 billion during April.

S&P's statement trimmed back sterling's overnight gains, which fell against the dollar from $1.5817 to $1.5722.

Only a few shares fought back to gain ground. Tullow Oil, up 34p to 980p, and Lonmin, up 12p to £12.79 were the biggest risers out of only four. The others were GlaxoSmithkline, up 5p to £10.63, Astrazeneca, up 11p to £26.46.

Miners led the retreat thanks to lower metals prices, with Eurasian Natural Resources down 57p to 558p. Kazakhmys lost 68p to 643.5p, and Antofagasta was down 44p to 576p. Xstrata was 33.5p lower at 638p.

The second biggest faller, after Kazakhmys was Cable & Wireless, shedding 15p to 142p.

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