LONDON FTSE 100 CLOSE 5,440.5 -72.2

LONDON'S leading share index closed 1.3 per cent lower last night, erasing much of Monday's gains, as falls in heavyweight commodity stocks tracked crude and metal prices lower.

The commodity-heavy FTSE 100 slumped 72.2 points to 5,440.5 after gaining 1.9 per cent in the previous session. The index has fallen about 16 per cent this year.

Talk of a looming UK recession saw the Footsie slump almost 3 per cent at one point yesterday morning, officially entering "bear market" territory, albeit only temporarily, when it hit 5358.7 - more than 20 per cent below its peak in June last year, and the classic definition of a bear market in which shares steadily decline.

However, an afternoon rally restricted losses.

Andrew Turnbull, director at Blue Index CFDs, said: "The majority of our clients have been adopting the strategy of selling into any strength.

"After sharp falls in US trading [on Monday night] due to potential rights issues at Freddie Mac and Fannie Mae, we have experienced further uncertainty in the UK, with concerns over the likelihood of a full recession."

Among the shares turning around during the day was embattled Marks & Spencer , which was the Footsie's biggest riser after speculation of bid interest in the chain.

The stock, which dived last week in the wake of a profits warning, lifted nearly 7 per cent to stand 14.5p higher at 231.5p.

Other retailers battered by fears over the consumer spending slowdown followed M&S higher, with Next up 17p at 873p and Morrisons 4.5p stronger at 260.5p. Currys owner DSG International lifted 1.5p to 36.25p in the FTSE 250 Index.

But London's banking stocks remained under pressure in the wake of further fears for the sector.

Royal Bank of Scotland , downgraded by Cazenove on Monday, lost 6.1p, or 3 per cent, to close at 194.9p, and Lloyds TSB dipped 9.75p at 287.75p.

Bradford & Bingley continued to cause concern, with shares down another 19 per cent, or 8p, to 34p, as one analyst suggested the stock was now effectively worthless. And Alliance & Leicester was nearly 14 per cent, or 33.75p, down at 214.75p, after Panmure Gordon said it now expected the bank to report losses this year and next.

Airlines were in notably better shape thanks to oil prices falling back. British Airways was 11.25p up at 217.25p, with second- tier rival EasyJet up 18.5p to 272.75p.

Housebuilder Persimmon , which unveiled a steep sales fall and 1,100 job cuts, added 7.75p to 228p by the close.

Miners were the biggest losers on the FTSE 100. BHP Billiton, Rio Tinto, Anglo American, Xstrata, Vedanta Resources, Lonmin and Eurasian Natural Resources fell between 3.5 and 6.8 per cent.

BP lost 3.4 per cent, Royal Dutch Shell dropped 2.3 per cent and gas producer BG Group slipped 4.4 per cent.

DOW JONES 11,383.21 +152.25

WALL Street finished sharply higher last night as oil prices dropped sharply for the second straight day and investors were encouraged by the possibility of more help for the ailing financial system.

Speeches by Federal Reserve chairman Ben Bernanke, US treasury secretary Henry Paulson and JPMorgan Chase chief executive Jamie Dimon gave the market some reassurance about the financial sector. Investors have been concerned this week about the health of US government-backed lenders Fannie Mae and Freddie Mac; their troubles helped send prices lower on Monday, but they also helped lead the rebound last night.

The Dow rose 152.25, or 1.36 per cent, to 11,383.21, after moving in and out of positive territory. Broader stock indicators rose as well. The Standard & Poor's 500 index rose 21.39, or 1.71 per cent, to 1,273.70, while the Nasdaq composite index rose 51.10, or 2.28 per cent, to 2,294.42.

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Story Source: Scotsman, The