By This Is Money Reporters

PUBLISHED: 03:23 EST, 24 January 2014 | UPDATED: 12:28 EST, 24 January 2014

17.10 (close): Global stock markets plunged into the red today amid fears of a new emerging markets crisis after Argentina’s currency suffered its steepest fall for 12 years.

Investors headed for the exit as concerns grew of a repeat of last June’s emerging markets rout following yesterday’s plunge in the value of the Argentinian peso as the country’s central bank gave up on its battle to prop up the currency through intervention in financial markets.

The FTSE 100 Index suffered its worst week of the year so far as investors made a flight to safety, falling 109.5 points to 6663.7 today – a drop of 1.6 per cent.

US slide: Further big falls on Wall Street heaped more pressure on the Footsie as concerns over emerging markets took their toll

London’s top tier has shed 2.4 per cent this week after falls in the previous sessions after Wednesday’s bigger-than-expected fall in UK unemployment reinforced speculation of an interest rate hike.

There were similar falls across Wall Street and European indices today, with the Dow Jones Industrial Average more than 170 points lower in early trade, while France’s Cac 40 and the Dax in Germany tumbled 2.8 per cent and 2.5 per cent respectively.

Nervous investors fretted that the emerging market woes would spread, with political turbulence also seeing the Turkish lira tumble to a new record low against the US dollar and the South African rand dropping sharply.

After being buoyed in recent sessions by speculation over interest rate rises, the pound fell a cent to 1.65 US dollars and by a similar level to 1.21 euros.

Among stocks, those with exposure to emerging markets were hardest hit in the sell-off, with Aberdeen Asset Management the biggest casualty after a decline of six per cent or 24.1p to 397.3p.

Other stocks on the back foot included International Airlines Group as the British Airways and Iberia owner is heavily focused on Latin America for growth.

Shares fell 21.1p to 406.3p, while global brewing giant SABMiller dropped 89p to 2889p and Asian-focused insurer Prudential sunk 48p to 1262p.

Lloyds Banking Group was down two per cent after Investec Securities removed its buy rating on the stock, citing the possibility of a further hit from payment protection insurance repayments.
Shares fell 1.7p to 81.4p.

Royal Mail shares were 15.5p lower at 572.5p after a trading update in which it highlighted an 8% rise in parcels revenues for the first nine months of the year.

The company, whose shares have shot up from 330p since its flotation in October, said it was trading in line with expectations, helped by a busy December for parcels and Christmas cards.

However, broker Panmure Gordon used the update as an opportunity to cut its recommendation on the stock to hold from buy.

There was no sign of a festive bounce for train set firm Hornby as it warned it will make a loss this year due to the impact of continued supply chain issues in China.

The Scalextric and Airfix maker saw shares fall by four per cent, off 3p to 77.5p.

The biggest FTSE 100 risers were RSA Insurance up 2p to 101.7p, Fresnillo ahead 12p at 792p, Randgold Resources 45p stronger at 4233p and Sainsbury’s 3.3p higher at 362.1p.

The biggest FTSE 100 fallers were Aberdeen Asset Management down 24.1p at 397.3p, International Airlines Group off 21.1p at 406.3p, Experian 52p lower at 1072p and Mondi 43p weaker at 936p.

15.25: The Footsie sank to a 1-1/2 week low in late afternoon trade, tracking similar big falls on Wall Street, with stocks exposed to emerging markets under the most pressure today as a rout in Latin American currencies took its toll.

With an hour or so of trading to go, the FTSE 100 was down 64.7 points at 6,708.6 on course for its biggest one-day percentage drop and biggest weekly fall of this year.

US stocks tumbled in early trade, with the Dow Jones Industrial Average dropping 118.3 points to 16,079.1 in the wake of the sell-off in emerging market assets and as expectations grew that the Federal Reserve will further trim its economic stimulus measures next week.

Many market participants expect the next Fed policy meeting to continue to wind down its bond buying programme by an additional $ 10billion a month.

The rout in emerging market assets came amid political problems in Argentina and spread to developed countries which also reflected uncertainty over Fed stimulus policy, and data yesterday showing slowing manufacturing growth in China.

Argentina’s government said today that it would loosen strict foreign exchange controls, after it abandoned its long-standing policy of supporting the peso currency by intervening in the foreign exchange market earlier this week. That resulted in the peso’s steepest plunge since the country’s 2002 financial crisis.

Asian shares slumped to 4-1/2 month lows today, extending the previous day’s weakness, on worries over Chinese economic growth and the decline in emerging market currencies.

In London, Aberdeen Asset Management was the top FTSE 100 faller, while peer Ashmore Group was among the steepest midcap decliners as both funds groups suffered from their heavy exposure to emerging markets after Argentina’s central bank gave up its battle against the currency’s decline.

Aberdeen Asset shares shed 26.2p at 395.2p, with Ashmore down 16.1p at 327.9p.

Temporary power provider Aggreko which also has exposure to Latin America fell 54.0p to 1,620.0p.

Among the stock market minnows, Finsbury Food Group saw its shares slide 4.8p lower to 50.0p after the Cardiff-based firm reported a 2.1 per cent fall in half-year sales at its UK bakery business after the rising cost of key ingredients, such as butter and chocolate, kept pressure on margins.

The group said it was offsetting this by cutting costs and making efficiencies, adding that overall underlying revenues in the six months to December 28 slipped to 86.6million from 88.2million a year earlier.

But on the up, Charles Stanley gained 22.8p at 524.3p as the wealth management group said its funds under management had risen to a record 20.1billion in the three months to December 31, up 13.4 per cent year-on-year over the first nine months of its year so far.

13.00: London shares dropped sharply today as global markets were spooked by a plunge in the value of Argentina’s currency which fueled fears over the health of emerging markets.

The slump for the peso came as the South American country’s central bank gave up on its battle to prop up the currency through intervention in financial markets.

By lunchtime, the FTSE 100 was down 61.7 points at 6,711.6 as a drop in the value by Tokyo’s Nikkei 250 added to pressure on equity markets following yesterday’s weak Chinese manufacturing figures.

Don’t cry for me: Global markets were spooked by a plunge in the value of Argentina’s currency which fueled fears over the health of emerging markets

The developments in Argentina dealt a blow to confidence in those stocks with exposure to emerging markets (EM), with funds group Aberdeen Asset Management the biggest blue chip casualty, down 24.2p to 397.1p.The stock was also pressured by a downgrade in rating to equal weight from Morgan Stanley.

‘Deteriorating fund performance compounds challenging EM fundamentals, increasing the risk of negative revisions and further multiple de-rating at ADN. We continue to avoid EM-centric managers, prefer SDR (Schroders) given skew to DM (developed markets) and multi-asset,’ Morgan Stanley analysts’ said in a note.

Other stocks on the back foot included International Airlines Group, 15.2p lower at 412.32p, with the British Airways and Iberia owner heavily focused on Latin America for growth. And global brewing giant SABMiller dropped 77.5p to 2,900.5p.

Among other blue chip losers, Lloyds Banking Group shed 1.4p to 81.6p after Investec Securities removed its buy rating on the stock due to a number of near-term factors, including the possibility of a further hit from payment protection insurance repayments.

Peer Barclays was also a faller, losing 5.8p to 273.1p, while Royal Bank of Scotland fell 3.3p to 341.5p having been hit yesterday by a downgrade in rating from UBS.

Royal Mail shares extended earlier falls, shedding 11.8p at 576.2p after an ‘unexciting’ trading update in which it highlighted an 8 per cent rise in parcels revenues for the first nine months of the year.

The company, whose shares have shot up from 330p since its flotation in October, said it was trading in line with expectations, helped by a busy December for parcels and Christmas cards.

Broker Panmure Gordon used the update as an opportunity to cut its recommendation on the stock to hold from buy.

Panmure analyst Gert Zonneveld said: ‘While we continue to see longer term upside potential in the share price, especially if we assume that the dividend pay-out ratio is likely to increase going forward, in the near term we expect the shares to tread water.’

Elsewhere, Cairn Energy lost 10.0p to 252.1p after it said it had been contacted by Indian authorities to discuss income tax assessments relating to 2007. Cairn said it was co-operating to provide the necessary information and would update the market in due course. The stock also fell as Morgan Stanley cut its target price for Cairn to 350p from 375p.

Toby Morris, Senior Sales Trader at CMC Markets said: ‘Very few people welcome a call from the tax man, and in the case of Cairn Energy this is very much the case’.

And outsourcing firm Capita shed 5.0p to 1,032.0p after a Daily Mail report said regulators could make it pay 100million to investors in a fund it operated that collapsed.

There were few blue chip gainers today, but utility companies did feature on the upside wanted for their defensive qualities given domestic earnings exposure and a strong dividend profile.

Multi-utility SSE, which issued an upbeat trading statement yesterday, gained 5.0p at 1,325.0p, while water group Severn Trent added 12.0p at 1,697p, and British Gas firm Centrica was up 0.1p at 320.8p.

09.55: The Footsie swiftly reversed an opening advance to drop back by midmorning knocked by heavy falls in stocks exposed to emerging market after Argentina’s central bank gave up its battle against itscurrency’s decline, with the Mexican peso also suffering and global markets taking fright.

Japan’s Nikkei 225 index slumped by more than 1.5 per cent, with trading in Tokyo also affected by a sell-off for export-related stocks following a rebound in the yen.

In London, the FTSE 100 was down 18.4 points at 6,754.9 extending yesterday’s falls when disappointing manufacturing data from China and some poor corporate trading updates saw the blue chip index suffer its biggest one-day fall this year.

Christmas delivered: Royal Mail highlighted an 8 per cent rise in parcels revenues for the first nine months of the year

The leading index is down 0.9 per cent this week, set for its steepest weekly loss of the year.

Brewer SABMiller, which has a large exposure to Latin America was a big blue chip faller, down 71p to 2,908.0p.

Aberdeen Asset Management also suffered from it heavy exposure to emerging markets, as well as a downgrade in rating by broker Morgan Stanley, with its shares losing 17.7p at 403.7p.

Royal Mail shares were 2p lower at 586p after a trading update in which it highlighted an 8 per cent rise in parcels revenues for the first nine months of the year.

The company, whose shares have nearly doubled from 330p since its flotation in October propelling it into the blue chip index, said it was trading in line with expectations, helped by a busy December for parcels and Christmas cards.

Joe Rundle, head of trading at ETX Capital said: ‘Numbers are in line with estimates but an unexciting read on the whole and do little to allay concerns about the company’s outlook.’

‘Difficult to be too optimistic on Royal Mail; need to hear from management on expansion plans, investment in infrastructure and resources together with international acquisitions. That being said, the update is not nasty enough to trigger a big correction in the share price which is up 80 per cent over the issue price the government sold it off for back in October 2013. If anything, it justifies the valuation still and will not silence the political controversy which surrounds it,’ he added.

Financial Times publisher Pearson shed 24.0p to 1,167.0p, extending the previous session’s falls after banks cut their target prices for the stock following yesterday’s profit warning.

Further down the pecking order, there was no sign of a festive bounce for train set firm Hornby as it warned on profits due to the impact of continued supply chain issues. The Scalextric and Airfix maker said it was confident that it has taken the steps needed to address the problems, but shares still fell 6.9p to 73.6p.

‘Although we had weakness on the FTSE yesterday, it is tempting to say that it is still an orderly decline… but with corporate earnings coming out as disappointing, it’s going to be hard for equities to make significant progress over the next few weeks,’ said Charles Stanley analyst Jeremy Batstone-Carr. 

08.15: The Footsie pushed higher in opening deals today, rallying after falls in the previous session, taking heart from comments from Bank of England Governor Mark Carney which suggested that UK interest rates are not going to rise anytime soon.

Reflecting this interest rate optimism, the FTSE 100 index was up 6.8 points at 6,780.1 in early trade.

In an interview late yesterday with the BBC’s Newsnight programme, Mark Carney insisted there is ‘no immediate need’ to increase interest rates despite unemployment hovering just fractionally above the 7 per cent threshold he mooted might make a rise possible.

Canny Carnet: The BoE governor said the UK central bank would look at overall conditions in the labour market rather than one indicator when determining interest rates

In an apparent softening of his ‘forward guidance’ policy, the governor said the UK central bank would look at ‘overall conditions in the labour market’ rather than one indicator. He also signalled that when rates change it will be a gradual process.

When Carney set the threshold on taking up his appointment last August the BoE had not expected unemployment to fall to 7 per cent for two years, but this week the level fell sharply to 7.1 per cent.

Michael Hewson Chief Market Analyst at CMC Markets UK said: ‘Last night’s comments shouldn’t really have been a surprise given comments he made in November last year “one could imagine a scenario where the unemployment threshold is reached and that the best policy for the MPC at that period of time is to keep rates at current levels because the trade-off between output and inflation is attractive.” With inflation now at 2 per cent the Bank is clearly playing that trade-off.’

‘It doesn’t change the fact that markets will be looking for some form of rate rise by 2015, but they pretty much knew that when the 2016 guidance was announced,’ Hewson added.

The UK blue chip index fell 53.05 points, to 6,773.28 points on Thursday, suffering its biggest one-day fall this year after disappointing manufacturing data from top metal’s consumer China and poor trading updates from easyJet and Pearson.

Royal Mail Group was the main corporate focus as the delivery firm, sold off last October in Britain’s biggest privatisation in decades, said underlying sales for the nine months to December 29 rose 2 per cent, helped by strong parcel demand over Christmas despite a decline in letters.

The firm said overall trading that was in line with the delivery firm’s expectations. Royal Mail shares, which have soared since their flotation, added 0.7p at 588.7p in early trade,

Stocks to Watch include:

BP – Countries across the world have been quietly signing deals in recent months to import natural gas from the United States as companies like BP find multiple buyers willing to take tranches of supply, revealing a growing appetite for the fuel overseas as domestic output soars.

WEIR GROUP – The engineer announces a $ 98million contract for provision of maintenance services in Iraq for Lukoil for two years.

CAPITA – Regulators could make the outsourcing firm pay more than 100million to investors in a fund it operated that collapsed, the Daily Mail reported.

SPORTS DIRECT, DEBENHAMS – The chief executive of Debenhams has met with his counterpart at the sports retailer for the first time since Sports Direct took out a complex bet on the department store, the Times reported.

MINERS – South Africa’s main platinum union started government-brokered talks with the world’s top three platinum companies on Friday after as many as 100,000 members of the Association of Mineworkers and Construction Union (AMCU) walked out at Anglo American Platinum, Impala Platinum and Lonmin on Thursday, hitting more than half of world platinum production.