FTSE Enters 'Bear Market' As £52bn Is Lost

The share index has fallen by 3.5%, taking it into so-called "bear market" territory - a fifth below its last peak.

The FTSE 100 has fallen sharply after the world oil price slump and fears over China prompted a renewed share sell-off.

London's leading share index dipped below the 5,700-mark as it shed 3.5% of its value, or 203 points, in a volatile session which knocked £52bn off the value of constituent companies by the close.

The FTSE 100 has had a grim start to 2016, its worst ever, having lost more than 9% in just the first few weeks of the year.

It is a far cry from its all-time high less than a year ago, when it topped 7,100, and the index is now trading at its lowest levels since November 2012.

The latest fall took the FTSE 100 more than 20% off that intraday peak last year, meaning that for a time it was in what is known as a "bear market". The last time this happened was during the depth of the financial crisis in 2009.

It follows a warning by the International Energy Agency that the oil market could "drown in oversupply".

Brent crude oil is now trading at around $28 a barrel, having fallen below that level earlier this week to the lowest price since November 2003.

Oil has fallen by around three quarters since it topped $115 In June 2014.

The FTSE fall came as oil giant Royal Dutch Shell announced earnings were expected to more than halve to $10.4-$10.7bn (£7.3-£7.6bn) for 2015, below City expectations.

Shell was among the biggest fallers in the latest session, sliding by 8% at one stage.

The fallers' board was led by big mining firms Glencore, Anglo American and BHP Billiton.

Their fortunes are closely linked to China – whose economic slowdown has weighed heavily on demand for the commodities they produce.

This week, China posted its slowest annual growth figure in 25 years. Meanwhile the International Monetary Fund slashed its growth forecast for the global economy as it predicted a "bumpier ride" for 2016.

A survey of business leaders has found they are gloomier about the future of the global economy than at any time in three years.

The FTSE 100's sharp downturn comes a day after a rally, adding 1.7%, which was in part inspired by hopes that China's troubles would prompt more stimulus policies such as interest rate cuts from Beijing.

Shares were also buoyed by a dovish speech from Bank of England governor Mark Carney suggesting it would be some time before a rise in the UK interest rate, largely because of the headwinds from the global economy.

But there was renewed gloom in Asia overnight, with Chinese and Japanese markets notably lower and the sentiment spreading to Europe. Tokyo's Nikkei also entered bear market territory.

Markets in Frankfurt, Milan and Paris were also down sharply.

Tony Cross, market analyst at Trustnet Direct, said: "It's back into the real world for London's equity market after yesterday's brief respite and it’s difficult not to be left looking at the slump in crude oil prices as a key driver here."

The performance of the FTSE 100 is more of a reflection of the global economy than the UK because many of its companies largely operate abroad but is significant for UK investors with many pensions funds having share in some of its big-name firms.

Experts at Investec said the current sell-off looked "overdone" with overall global growth not likely to see a slowdown and the easing of Chinese expansion still leaving the world's second biggest economy with a stable outlook.

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