* FTSE falls 1.8 percent
* S&P's U.S. credit rating downgrade sparks fresh growth
* Weir down on growth worries, hampered by liquidity
By David Brett
LONDON, Aug 8Britain's top share index was
sharply lower at midday on Monday, as investors effectively told
politicians around the world not enough was being done to stem
the debt crisis threatening to derail the global economic
The European Central Bank on Monday bought Spanish and
Italian bonds to halt contagion from the debt crisis in the
peripheral euro zone nations, but that only briefly delayed a
sell-off from a cut in the U.S. credit rating by Standard &
Poor's after the markets closed on Friday.
"Governments and central banks can do more. There's been a
move away from G20 coordination to piecemeal self interest.
(Global co-ordination) was helpful during the (credit) crisis,
and that is something that has broken down," Philip Poole,
global head of macro investment strategy at HSBC Global Asset.
"The principal concern is the growth outlook and the extent
to which the growth outlook and the global recovery is being
compromised ... It's all a hangover from the pre-crisis era,
which was funded by leverage."
Finance chiefs from the G7 group of major industrial powers
pledged to take whatever action was needed to stabilise markets
that have lost faith in leaders' resolve to tackle the twin debt
crises in Europe and the United States.
Miners , banks and integrated oil
stocks led the FTSE 100 down 95.70 points,
or 1.8 percent, to 5,151.29, adding to last week's fall of 9.7
The FTSE volatility index , a gauge of investor
fear, shot up more than 28 percent on Monday, having risen all
Miners again bore the brunt of the sell-off as worries grew
over the outlook for demand, with concerns governments will be
forced to adopt more austerity measures to keep a lid on the
debt crisis, therefore stifling growth.
Global miner Rio Tinto fell 4.4 percent after Rio
and Japan's Mitsubishi Corp proposed buying out Coal &
Allied for A$1.49 billion ($1.56 billion).
But gold soared to all-time highs as investors fled
As an equity proxy for the precious metal, Randgold
Resources added 2.5 percent, also supported by an
upgrade in its investment rating by Deutsche Bank to "buy".
Mexican silver miner Fresnillo gained 0.6 percent,
with Deutsche Bank raising its target price to 2,000 pence.
Elsewhere, Weir fell 7.6 percent, with traders
citing a downgrade by Morgan Stanley hitting the engineer's
shares as investors continue to shy away from equities in a
flight from risk.
Analysts also said liquidity was playing a major role in the
decline of Weir's shares, which have fallen more than 27 percent
in the last 10 trading days.
"When funds find themselves forced to sell positions in
panicked markets, the most liquid stocks bear the brunt of
selling, simply because they can be sold," Singer Capital
Citigroup said the market was pricing in a 27 percent
earnings per share downgrade to its 2012 forecasts for the
On the upside, insurer Standard Life was up 2.3
percent ahead of first half results due on Wednesday.
U.S. stock index futures pointed to sharp falls when Wall
Street opens on Monday in reaction to the downgrade by Standard
And investors will be looking to see if July's U.S.
employment index at 1400 GMT bears out Friday's above-forecast
June jobs report.
(Editing by Will Waterman)
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