WPP was the worst-performing stock on London’s blue-chip index, falling 7 per cent on a suggestion that results from Sir Martin Sorrell’s advertising agency next month would disappoint with no sign of a recovery in demand.

Thomas Singlehurst, a Citigroup analyst, said that while the market seemed to be expecting a recovery in demand in the second half of this year, he believed that WPP’s revenue would continue to fall over this year and would show little growth in the next. He emphasised that while marketing budgets were one of the last items that companies cut in a recession, they were also one of the last to be raised in a recovery.

The falling value of the dollar, in which WPP collects most of its fees, would not help. He thinks first-half results will show sliding profitability and raise alarm bells with investors. He cut from “hold” to “sell” with a target of 340p. WPP lost 29p to 384½p.

The FTSE 100 fell 106.44 points to 4,234.27 driven by weaker than expected US employment figures that reignited fears over the global economy and pushed the safe-haven dollar up and commodity stocks down. But trading was thin ahead of the US Independence Day holiday today.

Diageo was one of only four gainers, up 8p to 905p, after Exane BNP Paribas declared its dividend the safest and most attractive in the European beverage sector and Goldman Sachs reiterated “buy” advice with an £11.91 target, saying its closure of Scotch whisky plants, announced on Wednesday, would be mildly positive for earnings.

Petrofac added another 3½p to 678½p a day after it revealed that it had found oil at a side well of its Don Northwest North Sea field. But it was one of the few oil stock gainers, after a big rise in stockpiles of unsold petrol in the US on Wednesday night reinforced worries about falling oil demand. BP lost 9.05p to 480.95p.

Anglo American dropped 29p to £17.35 as some of its gains after Xstrata’s bid approach fell away. Xstrata itself lost 28.8p to 664.4p. Rio Tinto fell 123p to £20.35 after its brokers sold all its rights issue shares.

London Stock Exchange lost 38½p to 667p after new chief, Xavier Rolet, introduced a cut-price tariff for trading to stave off the threat from cheaper rival electronic exchanges.

BAE Systems fell 12½p to 324¾p despite Cazenove’s assertion that Britain would not slash defence budgets until after the next election, while the US looked committed to maintaining defence spending on Afghanistan.

Carpetright benefited from vague bid speculation, up 20½p to 579p, as did Marston’s, the pub group, which rose 2½p to 129¾p on continuing chatter that Greene King, up 12¼p to 422¼p, might buy it. The latter was lifted by strong figures that buoyed the whole sector. JD Wetherspoon rose 4¼p to 407p. Punch Group, however, was flat at 100p after it sold four Cornish pubs to St Austell Brewery as it struggles to bring down its huge debts. There are worries the sale of prime pubs is simply eroding its earnings.

Game Group fell 22p to 142p after it reported that sales of computer games had dived in the past two months.

New York: Wall Street slid after a labour market report underscored worries over the prospects for a recovery. The Dow Jones industrial average closed down 223.32 points, or 2.63 per cent, at 8,280.7.

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