FTSE CLOSE: £31bn wiped off London's blue chip index as trading turmoil in China and plunging oil prices hit markets

17.05 (close): London's blue chip share index saw almost £31billion wiped off its value amid a global markets rout sparked by trading turmoil in China and plunging oil prices.

The FTSE 100 Index tumbled by 119.3 points to 5954.1 - a fall of almost two per cent - in the wake of further heavy losses in Asia.

China's benchmark Shanghai Composite Index plunged more than seven per cent overnight - triggering the second so-called circuit breaker move to halt trading this week. Trading on the exchange lasted only half an hour.

Markets in Asia are being hit by the withdrawal of Chinese government measures introduced last year to prop up share prices, while investors are also unnerved by signs of a worsening slowdown in China's economy.

Steep falls in oil prices are compounding the worldwide stock market sell-off, with the cost of benchmark Brent crude collapsing to fresh 11-year lows, sinking below 33 US dollars a barrel during the day.

The picture was dire across Europe, with the Dax in Germany shedding more than two per cent and France's Cac 40 off 1.7 per cent. In New York the Dow Jones Industrial Average was down more than 150 points in early trading.

Connor Campbell, financial analyst at Spreadex, said: 'The global indices have been left in the midst of what is arguably their most calamitous week since the storied trading of last August.'

Chinese stock trading was also suspended on Monday after a plunge that sent markets reeling in a dismal start to 2016.

The Shanghai benchmark has dropped 12 per cent in the first week of the new year alone.

During the day Chinese regulators said they would suspend their new circuit-breaker system designed to limit volatility, after it led to global stock market falls on both occasions it had been used.

The pound was down two cents against the euro at 1.34, after official data showed that unemployment across the 19-country eurozone fell to its lowest rate in a little more than four years, down 130,000 to 16.9 million.

Sterling was a cent down against the US dollar at just over 1.45.

The latest stock market falls come as Chancellor George Osborne warns over a 'dangerous cocktail' of threats to the UK economy in a speech in Cardiff.

He will say: 'We are only seven days into the new year, and already we've had worrying news about stock market falls around the world, the slowdown in China, deep problems in Brazil and in Russia.

'Commodity prices have fallen very significantly. Oil, which was over 120 dollars a barrel in 2012, now stands at less than 40 dollars.'

In London, commodity stocks led the declines, with blue chip oil companies among the hardest hit as the cost of crude continues to be hammered by global over-supply and falling demand amid the slowdown in the world economy and China.

Market heavyweights BP fell by 1.7 per cent and Royal Dutch Shell was 2.8 per cent lower.

15.30: The Footsie has shown signs of steadying after the China Securities Regulatory Commission suspended the recently implemented circuit breaker system which has caused havoc across global markets this week.

In afternoon trading, the FTSE 100 index was down 111.8 points, or 1.8 per cent at 5,962.6, a mild improvement on its performance since lunch.

But the announcement from Shanghai wasn't enough to halt the slide at the opening bell on Wall Street. The S&P 500 opened 24.0 points lower at 1,970.0, the Dow Jones dropped 225.0 points to 16,676.0 and the tech laden Nasdaq lost 102.0 points at 4,734.0.

Watching closely: Traders are hoping that the decision by the China Securities Regulatory Commission to suspend its recently implemented circuit breaker system will end the recent turmoil

Watching closely: Traders are hoping that the decision by the China Securities Regulatory Commission to suspend its recently implemented circuit breaker system will end the recent turmoil

Traders said the new breaker system was having adverse effects which Chinese authorities had not anticipated, namely that it was encouraging and not preventing panic selling. 

Gerry Alfonso, at Shenwan Hongyuan Group said: 'It is clearly adding some unintended consequences, such as people trying to sell before the break, which is actually accelerating the decline.' 

Cutting off the halting mechanism is meant to 'keep the markets stable,' according to the Shanghai Stock Exchange website. 

The China Securities Regulatory Commission said in a statement on its website: 'The circuit breaker mechanism is not the main reason for the market drop, but based on the experience of the two recent instances, it hasn't achieved the expected effect, but rather produced a definite 'magnetic effect.' 

The change comes after Shanghai stocks were halted for the second time this week after another brutal selloff. 

Under the system, if an index rose or fell 5 per cent, trading was halted for 15 minutes. If it dropped by 7 per cent, trading stopped for the rest of the day. 

Connor Campbell, at Spreadex, said: 'Whilst still pretty dire, the global indices appear to have been calmed this afternoon by news that China will be suspending the stock market circuit breaker rule that has wreaked such havoc this week.

'It seems that investors, for now at least, are taking the news as a positive, the move ostensibly preventing the panic-pause-more panic pattern that appeared in the Chinese markets on Monday and Thursday from repeating itself.' 

He added: 'That's the theory, at least; we'll just have to see how it works in practice tomorrow morning, as whilst the exacerbating nature of the circuit breaker rule may have been removed, the fear-inspiring issues currently scaring the bejesus out of investors remain unsolved.'   

Nevertheless there is still plenty for investors to worry about. The price of oil has fallen to $33 a barrel, its lowest level in 12 years, and geopolitical risks still loom.

North Korea conducted a nuclear test earlier this week, tension is growing between Saudi Arabia and Iran, and Britain has threatened to leave the European Union.

Throw in economic contractions from the likes of Brazil and Russia and divergent monetary policy by central banks around the world for the first time since the 1990's and it comes as no surprise that investors remain nervy. 

Billionaire investor George Soros also played his part, telling an economic forum in Sri Lanka, that there are similarities between the present environment and the financial crash of 2008.

13:00: The Footsie nursed hefty losses at lunchtime, remaining around 3 per cent lower as global equities slumped again, hit by further trading turmoil in China and plunging oil prices, with US stocks seen joining in the sell-off again this afternoon in advance of tomorrow's US jobs report.

By mid session, the FTSE 100 index was down 171.8 points, or 2.7 per cent at 5,901.6, having surrendered the psychologically important 6,000 mark after the Chinese stock market was suspended for the second time this week.

European markets were sharply lower as well, with France's CAC 40 index down 2.8 per cent, and Germany's Dax 30 index off 3.1 per cent.

US stock futures pointed to another triple-digit drop by the blue chip Dow Jones Industrial Average today in the face of the global turmoil, and with the key US December jobs report due tomorrow.

Fresh falls: US stock futures pointed to another triple-digit drop by the blue chip Dow Jones Industrial Average today in the face of the global turmoil, and with the key US December jobs report due tomorrow

Fresh falls: US stock futures pointed to another triple-digit drop by the blue chip Dow Jones Industrial Average today in the face of the global turmoil, and with the key US December jobs report due tomorrow

Ahead of that all-important data, investors will have the latest US Challenger Job cuts report and US weekly jobless numbers to digest today.

Craig Erlam, senior market analyst at Oanda, said: 'US indices are poised for another woeful session on Thursday after circuit breakers were once again triggered in China overnight, the knock-on effect of which has pushed global equity markets deep into negative territory and prompted a surge in safe haven flows.'

Overnight China's benchmark Shanghai Composite Index plunged more than 7 per cent, triggering the second so-called circuit breaker after less than half an hour of trading, with investors unnerved by recent signs of a worsening slowdown in China's economy.

Steep falls in oil prices were also compounding the global stock market sell-off, with benchmark Brent crude holding near 12-year lows today, but easing back above $33 a barrel.

On currency markets, the pound was 2 cents lower against the euro at €1.34, after eurozone data showed that unemployment across region fell to its lowest rate in a little more than four years, down 130,000 to 16.9 million.

Sterling was also a cent down against the dollar at just over $1.45 as safe haven-buying boosted the US currency.

Among equities, miners remained among the biggest blue chip fallers on the China woes, with Anglo American down 10 per cent or 27.6p to 242.9p, BHP Billiton off 39.8p at 669.6p, and Antofagasta losing 21.1p to 412.6p.

Retailer Marks & Spencer was also lower, down 7.7p at 430.9p after it revealed that its boss Marc Bolland will retire in April after six years at the helm as it posted a dire Christmas performance from its womenswear division.

Mr Bolland will be replaced by the head of the chain's general merchandise business, Steve Rowe, who has worked at M&S for more than 25 years.

M&S said like-for-like sales in its general merchandise arm, which includes clothing, slumped by 5.8 per cent in the 13 weeks to December 26. The weak figures were blamed on unusually mild weather and poor stock availability.

Elsewhere on the high street, Poundland topped the FTSE 250 fallers board, down 11 per cent or 21.3p to 170.7p after the discount retailer warned on full year profits as its third quarter trading update disappointed.

Poundland said its festive sales grew 29.4 per cent to £424.9million in the 13 weeks to December 27 compared with a year ago, lifted by its recent purchase of rival 99p Stores, but it added that UK high street footfall remained below last year and this impacted overall sales growth.

The firm, which also cautioned with its half-year results in November, said it expects full-year profits to come in at the lower end of its £39.8million to £45.8million range, despite tighter cost and margin controls.

10.30: The Footsie dropped back sharply as the morning session progressed, just clinging on to the 5,900 level as global markets again slumped into the red with equities hit by further trading turmoil in China and plunging oil prices, while the pound fell to a 5-1/2 year low versus the dollar.

By mid morning, the FTSE 100 index had tumbled 2.8 per cent, or 171.8 points to 5,901.6, falling below the psychologically important 6,000 mark after the Chinese stock market was suspended for the second time this week.

European markets also tumbled, with France's CAC 40 index shedding 2.8 per cent, and Germany's Dax 30 index dropping 3.1 per cent.

Big falls: Another tumble by the FTSE 100 index took its losses so far in 2016 to over 7%

Big falls: Another tumble by the FTSE 100 index took its losses so far in 2016 to over 7%

China's benchmark Shanghai Composite Index plunged more than 7 per cent overnight - triggering the second so-called circuit breaker after less than half an hour of trading.

Markets in Asia were hit by the withdrawal of Chinese government measures introduced last year to prop up share prices, while investors were also unnerved by signs of a worsening slowdown in China's economy.

Steep falls in oil prices were compounding the worldwide stock market sell-off, with the cost of benchmark Brent crude collapsing to fresh 11-year lows, sinking below $33 a barrel.

Dennis de Jong, managing director at UFX.com, said: 'Oil reserves are at record levels around the world, so with a previously guzzling China beginning to choke it's little surprise we're now seeing the cost of a barrel at an 11-year low.

'$32 might not be the floor of oil prices as they could continue to tumble. Yet it's worth keeping an eye on the unrest in the Middle East which could quickly see prices shoot back up.

'For consumers it's all cheer, notably in the UK where major supermarkets are set to pump out petrol and diesel at less than £1 a litre.'

In London, blue chip oil companies were among the hardest hit as the cost of crude continues to be hammered by global oversupply and falling demand amid the slowdown in the world economy and China. BP, Royal Dutch Shell, and BG Group all fell around 5 per cent.

Miners were also among the biggest fallers with Anglo American down 8 per cent, or 23.3p to 247.6p, BHP Billiton 36p lower at 671.3p and Antofagasta off 22.7p at 411p.

Marks & Spencer had been one of only two FTSE risers early on after it said its boss Marc Bolland will retire in April after six years at the helm as it posted a dire Christmas performance from its womenswear division.

Mr Bolland will be replaced by the head of the chain's general merchandise business, Steve Rowe, who has worked at M&S for more than 25 years.

The stores group also revealed like-for-like sales in its general merchandise arm, which includes clothing, slumped by 5.8 per cent in the 13 weeks to December 26. The weak figures were blamed on unusually mild weather and poor stock availability. But its shares succumbed to the market malaise, and fell 3.0p to 435.7p.

That left only one blue chip gainer, precious metals miner Randgold Resources, up 2 per cent or 78p at 4,406p as the price of gold rose further towards $1,100 an ounce on safe haven buying.

On currency markets, safe-haven buying also gave a boost to the dollar, which rose to a five-and-a-half year high versus the pound at $1.4558.

The dollar's gains were helped too by the publication last night of minutes from last month's Federal Reserve policy meeting, which suggested that there could be four further hikes in US interest rates this year after December's first move since 2008.

Sterling was also weaker versus the euro at €1.3895. The single currency was helped by news eurozone unemployment fell for a third straight month in November to its lowest level in more than four years.

Figures from Eurostat showed the region's seasonally adjusted jobless rate dropped to 10.5 per cent in November, which was the lowest level since October 2011.

But on the flipside, eurozone retail sales posted a fall on a yearly basis to 1.4 per cent rather than the expected 2 per cent gain. 

08.30: The Footsie plunged another 2 per cent in early trading as commodity stocks took another pounding after Chinese stock markets had their shortest-ever trading session overnight, suspended for the day after just 15 minutes as trading curbs were triggered again after a fresh 7 per cent drop.

After 15 minutes of trading, the FTSE 100 index had dropped 141.5 points, or 2.3 per cent to 5,931.9. The UK blue chip index closed 63.86 points, or 1.0 per cent lower yesterday at 6,073.38, extending Monday's 2.4 per cent slump after a modest rally on Tuesday was swiftly expunged.

European markets also tumbled again today, with France's CAC 40 index shedding 2.6 per cent, and Germany's Dax 30 index dropping 3.3 per cent.

Lone gainer: Only one blue chip stock was higher in London, with Marks & Spencer up on turnaround or takeover hopes after news its chief executive Marc Bolland (pictured left) will step down in April

Lone gainer: Only one blue chip stock was higher in London, with Marks & Spencer up on turnaround or takeover hopes after news its chief executive Marc Bolland (pictured left) will step down in April

Andy McLevey, Head of Dealing at stockbroker Interactive Investor, said: 'Global markets are in turmoil with the FTSE 100 index trading at 5957 in early trading as shares in China collapsed 7 per cent in less than 30 minutes triggering new circuit breakers and a second halt to trading this week amid a sliding Yuan and continued concerns about the growth prospects of the economy.

'With oil prices continuing to plummet and geopolitical tensions to the fore investors are scurrying to the sidelines and even these current levels may not be enough to tempt many back short term as the uncertainty continues. '

Only one blue chip stock was higher in London, with Marks & Spencer adding 2.9p at 441.6p on turnaround or takeover hopes after news its chief executive Marc Bolland will step down in April, bringing an end to six difficult years as the high street retailer unveiled another poor Christmas trading update.

Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, said: 'In the least shocking announcement of the day, M&S has reported a rise in food and a drop in General Merchandise sales.

'There are other considerations in play, not least of which is the announcement of a change at the helm.

'Meanwhile, online sales continue to grow strongly, albeit against a weak comparative, whilst from an investment perspective the cash generative nature of the business has allowed a supportive share buyback programme and a dividend yield of 3.9 per cent, which is attractive in the current interest rate environment.'

Elsewhere on the high street, discount retailer Poundland was the biggest FTSE 250 faller, plunging 8.5 per cent, or 15.8p to 176.2p after it said fewer shoppers on the high street this Christmas hit its sales growth, and would result in profits coming towards the lower end of forecasts.

Housebuilders were also in focus after mortgage lender Halifax said house prices reached a record high of £208,000 on average in December after leaping by 9.5 per cent during 2015.

Across the UK, the average price in December was £208,286, after increasing by 1.7 per cent month-on-month, it said.

The annual increase of 9.5 per cent recorded in December was up from 9% in November.

But there were signs that the pace of price growth is softening slightly. The quarterly rate of growth, which tends to be a good indicator of underlying trends, has remained below 2 per cent for two months in a row, Halifax said.

Blue chip Persimmon was 5p lower at 1,960p although Britain's second-biggest housebuilder by volume said in a trading update today that its revenue rose 13 per cent last year as it built more homes, boosted by strong sales in the second half of the year. 

07.55: The Footsie is set for another drop at the open this morning after Chinese stock markets had their shortest-ever trading day overnight, suspended for the day after just 15 minutes after trading curbs were triggered again after a fresh 7 per cent plunge on worries over a slowing economy, tumbling oil prices, and North Korea's nuclear test.

The FTSE 100 index is forecast to open 79 points lower. The UK blue chip index closed 63.86 points, or 1.0 per cent lower yesterday at 6,073.38, extending Monday's 2.4 per cent slump after a modest rally on Tuesday was swiftly expunged.

Farbod Mimeh, junior dealer at London Capital Group, said: 'In China circuit breakers were triggered and trading halted for the day after just 15 minutes of frantic trading. That short space of time was enough for $640bn to be wiped off stocks leaving the Shanghai composite index down 7.3%.

Another drop: In China, circuit breakers were triggered and trading halted for the day after just 15 minutes of frantic trading. That was enough for $640bn to be wiped off stocks leaving the Shanghai index down 7.3%

Another drop: In China, circuit breakers were triggered and trading halted for the day after just 15 minutes of frantic trading. That was enough for $640bn to be wiped off stocks leaving the Shanghai index down 7.3%

'The use of circuit breakers earlier in the week provoked the sharp move last night as investors panicked after an initial trading halt just a couple minutes into the session.

'It was another bleak day on Wall Street, as U.S stocks crumble under the strain of sinking oil prices and further disarray in China. Forsaken by risk-averse bulls, equities suffered another catastrophic slide in turbulent market conditions.

'The second dramatic sell-off this week saw the Dow condemned to a 250 point decrease amid intensifying global market concern.'

Adding to worries about global growth, overnight The World Bank cut its global economic growth forecast for 2016, saying the weak performance of major emerging market economies will tamp activity overall, as will anaemic showings from developed countries such as the United States.

Global growth should accelerate to 2.9 per cent this year from 2.4 per cent in 2015, the bank said, but that still represents a downgrade from its June forecast for 3.3 per cent growth.

The bank raised particular concern about the flagging performance of top emerging economies.

Meanwhile George Osborne will today warn of a 'dangerous cocktail' of threats to the UK economy as he insists there can be no 'let up' in the squeeze on spending.

The Chancellor will accuse political opponents of a 'creeping complacency' about the prospects for recovery, citing turmoil in the Middle East, an economic slowdown in China, plunging commodity prices and a risk of stagnation.

But even as the market turmoil rolls on, minutes released from December's Federal Reserve meeting last minute revealed that policymakers generally expect four quarter-point rate hikes in 2016, although the minutes made clear that some officials will be wary of further increases if higher inflation does not materialise, and all agreed that persistently low inflation was a worry.

Fed policymakers decided to raise interest rates last month for the first time since 2008 after almost all of them gained confidence inflation was poised to rise, but some voiced worries inflation could get stuck at dangerously low levels.

Stocks in focus in London include:

MARKS & SPENCER: Marc Bolland will step down as the boss of M&S in April, bringing an end to six difficult years at the British retailer following yet another poor Christmas trading.

POUNDLAND: The discount retailer said fewer shoppers on the high street this Christmas hit its sales growth, and would result in profits coming towards the lower end of forecasts.

PERSIMMON: Britain's second-biggest housebuilder by volume said its revenue rose 13 per cent last year as it built more homes, boosted by strong sales in the second half of the year.

UK company news scheduled today includes:

Trading updates: Marks & Spencer, Poundland, Signet Jewellers, Persimmon, Rathbone Brothers

Traffic figures: easyJet

Ex-dividends to clip 0.9 points off FTSE 100 index (Aberdeen Asset, British Land, Johnston Matthey)

Economic news scheduled today includes:

Halifax house price index at 8am 

UK new car registrations at 9am

ONS profitability figures for UK companies in the third quarter

eurozone retail sales at 10am

eurozone unemployment at 10am

US Challenger job cuts at 12.30pm

US weekly jobless claims at 1.30pm