London’s top flight closed 21.739 points lower at 5,454.57 at the end of trading on Wednesday.
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Global markets slumped after new figures revealed a major manufacturing slowdown with mass factory job cuts across the world.
The FTSE 100 slid into the red after the closely watched Manufacturing Purchasing Managers’ Index (PMI) fell to 47.8 in March, down from 51.7 in February.
The reading, which was matched by declines elsewhere in Europe, represented the sharpest fall in manufacturing output since July 2012.
London’s top flight closed 217.39 points lower at 5,454.57 at the end of trading on Wednesday.
Other major European markets also fell on the back of disappointing PMI data, although many stocks pulled up slightly from intraday lows.
The German Dax decreased by 3.94%, while the French Cac moved 4.3% lower.
Across the Atlantic, the Dow Jones opened lower as trading sentiment was particularly weakened by Donald Trump’s Tuesday warning that the next two weeks are going to be “very painful”.
Meanwhile, sterling slipped against the stronger dollar amid caution over the manufacturing sector data.
The value of the pound fell 0.18% versus the US dollar at 1.239 and was up 0.75% against the euro at 1.133.
Banking firms performed particularly badly on Tuesday, weighing down the FTSE 100 after they became the latest to scrap billions of pounds in dividends.
It came after a request from the Bank of England’s Prudential Regulation Authority (PRA) that they suspend all plans to return money to shareholders.
Connor Campbell, financial advisor at Spreadex, said: “A new month, and quarter, saw Europe resume its losses, a wave of dividend-cancelling updates from the banking sector proving to be no April Fools for investors.
“With all the big banking boys suspending dividends, share buybacks and the like, investors were dealt another reminder of the economic impact of the coronavirus.”
HSBC fell 43.25p lower to 411p, Royal Bank of Scotland fell 5.9p to 107p, Lloyds closed 3.73p lower at 28.27p at Barclays slid 11.25p to 82.86p.
In company news, BP shares dipped after the oil giant said it is acting quickly to strengthen its finances amid the “most brutal environment for oil and gas businesses in decades”.
The company said it will reduce its capital spending plans by 25%, with a new forecast of 12 billion US dollars (£9.7 billion), as part of cost reductions to mitigate plummeting oil prices. Shares moved 10.5p lower to 333.7p.
Auto Trader shares dived after the online car seller and trading platform revealed plans for an investor cash call to bolster its balance sheet as it furloughed staff.
Auto Trader said it would launch a placing of up to 46.5 million new shares representing around 5% of its issued shares capital to strengthen its finances.
Shares fell 48.5p to 390.6p.
The price of oil moved back into the red as demand woes continued to press on the market.
The price of a barrel of Brent crude oil decreased 3.56% to 24.9 US dollars.
The biggest risers on the FTSE 100 were Ocado, up 109.5p at 1,329.5p, BAT, up 97.5p at 2,856.5p, Imperial Brands, up 33.2p at 1,530p, and Morrisons, up 2.5p at 180.5p.
The biggest fallers of the day were Carnival, down 202.4p at 779p, Meggitt, down 44.7p at 245.6p, Melrose, down 13.5p at 78p, and Barclays, down 11.25p to 82.86p.