By This Is Money Reporters

PUBLISHED: 04:00 EST, 27 January 2014 | UPDATED: 12:28 EST, 27 January 2014

17.15 (close): Another grim session for investors left the FTSE 100 Index nearly two per cent lower on a day of heavy losses for Vodafone and oil and gas group BG.

The slump by the blue-chip pair wiped as much as 50 points from the FTSE 100 Index, which fell by more than other European markets to finish 113.1 points lower at a five-week low of 6550.6.

The decline was on top of a loss of 100 points on Friday after a plunge in the value of Argentina’s currency sparked fears of a new emerging markets rout.

US up: The Dow Jones Industrial Average managed an early recovery today after notching up its worst week since June 2012

Anxiety is building over what might happen if, as expected, the US Federal Reserve later this week stages a further withdrawal of the monetary support pouring billions every month into the world’s biggest economy.

Availability of ‘easy money’ in the US has seen investors ploughing cash into fast-growing emerging markets to seek better returns so there is concern over what will happen to these economies when the taps are turned off.

The dollar weakened against the pound, which was up by just under one per cent against the greenback at 1.65 and at 1.21 against the euro single currency.

Sentiment in London was further impacted by the performance of two heavyweight stocks, with BG off 173p at 1082p after it downgraded its earnings guidance for this year and next.

It said too much of its gas production has been diverted into Egypt’s domestic market rather than being made available for exports.

And Vodafone slid four per cent or 9p to 223.5p after AT&T dismissed speculation linking it to a potential 60billion takeover approach for the UK company.

Under takeover rules, AT&T is now prevented from making a move for Vodafone for six months, unless another party tables an offer for the UK company in the meantime.

Other fallers included Royal Bank of Scotland after its admission late in the session that it will have to set aside more than 3billion in additional funds to cover litigation and customer compensation claims.

The sum includes an extra 465million to cover a redress scheme for customers mis-sold payment protection insurance. Shares were 7.5p lower at 332.2p, a drop of two per cent.

Fund supermarket Hargreaves Lansdown was also under pressure, down 80p or five per cent to 1429p.

Outside the top flight, Premier Foods fell 1.5p to 142.25p as the Mr Kipling and Bisto owner said it would hand a controlling stake in its struggling Hovis bread business to American investor Gores Group for 30million.

Shares came under pressure after the company reported difficult trading in the final three months of the year, with sales of its front-line brands down by one per cent due to increased promotional activity.

Pawnbroker Albemarle & Bond slumped after it said attempts to find a buyer for the business had failed, casting further doubt over the future of the company.

The stock halved by 11.25p to 8p as Albemarle said its attempts to secure a rescue were unlikely to carry much value for shareholders.

The biggest FTSE 100 risers were United Utilities up 13p at 713.5p, Severn Trent ahead 22p at 1700p, Rolls-Royce up 12p at 1184p and Weir Group ahead 17p at 2107p.

The biggest fallers were BG Group down 173p at 1082p, Hargreaves Lansdown off 80p at 1429p, Vodafone down 9p at 223.5p and Pearson off 45p at 1126p.

15.40: The Footsie nursed hefty losses in late afternoon trade, weighed down by falls from Vodafone and BG Group, with the index failing to get any respite from an opening bounce by US shares.

With under an hour of trading to go in London, the FTSE 100 index was down 109.5 points at 6,554.2, extending Friday’s 100 point slide on worries over emerging markets.

But Wall Street managed to rebounded modestly today, with the Dow Jones Industrial Average up 27.1 points at 15,906.2, recovering after its worst week since June 2012.

Investors were focused on some positive corporate earnings from big names like earthmoving equipment group Caterpillar, and on hopes for results from technology giant Apple due after the New York closing bell today.

Caterpillar, seen as an economic bellwether for global activity posted a 44 per cent jump in fourth quarter profit, although sales fell 10 per cent, and the firm said it expects a $ 1.7billion buyback of shares in the first quarter of this year.

On the US economic front, sales of new single-family homes fell 7 per cent in December, but the whole of 2013 saw the highest sales level in five years, the government said today.

New home sales rose a seasonally adjusted 414,000 in December, below forecasts for an annual rate of 455,000, but were up 4.5 per cent from a year earlier.

For all of 2013, new-home sales hit 428,000, the most since 2008. Despite growth over 2013, sales remain far below a peak rate of almost 1.4million in 2005.

The data provided mixed indications for the Federal Reserve ahead of this week’s policy committee meeting. Most observers still expect the US central bank to cut its bond-buying programme again, by about $ 10million to $ 65 billion a month.

This likely further tapering of the Fed’s economic stimulus measures added to the pressure on emerging markets which slid on a currency crunch last week.

In London, market heavyweight Vodafone was a big drag on the Footsie, with its shares down 8.1p to 224.5p after US telecoms giant dismissed speculation it could launch a 60billion takeover bid for the UK mobile phones provider.

Energy group BG was the biggest blue chip faller, shedding 180.0p at 1,075.0p after it downgraded its earnings guidance for this year and next blaming the turmoil in Egypt.

There were some bright spots among the mid caps, however, notably F&C Asset Management which saw its shares soar nearly 25 per cent higher, up 22.7p to 116.2p after Canadian bank BMO made a preliminary 120p a share offer to buy the group, valuing it at 697million in total.

13.20: Shares in mobile phones group Vodafone slumped 6 per cent, while those of oil and gas explorer BG Group dived 15 per cent as London shares notched up another grim session today.

The pressure from the blue-chip pair was estimated to have wiped around 50 points from the FTSE 100 Index, which fell by more than other European markets to stand 93.8 points lower at 6,569.9 at lunchtime.

That decline was on top of a loss of 100 points on Friday after a plunge in the value of Argentina’s currency sparked fears of a new emerging markets rout.

Footsie flight: The UK blue chip index notched up further sharp falls today, of a similar-size to Friday’s 100 point slide

Anxiety is building over what might happen if, as expected, the US Federal Reserve later this week stages a further tapering of its bond buying programme which has been pouring billions every month into the world’s biggest economy.

Availability of ‘easy money’ in the US has seen investors ploughing cash into fast-growing emerging markets to seek better returns so there is concern over what will happen to these economies when the taps are turned off.

In London, BG Group was easily the biggest blue chip faller, plunging 185.25p to 1,069.5p after it downgraded its earnings guidance for this year and next blaming the turmoil in Egypt.

BG said too much of its gas has been diverted into Egypt’s domestic market rather than being made available for exports.

Other energy stocks also suffered, Royal Dutch Shell, which rocked the sector with its own profits warning earlier this month and reports fourth quarter results this Thursday, was down 10p to 2,262p.

And BP, which reports its latest numbers on February 4 at the same time as BG Group, was off 5.1p to 481.5p.

Meanwhile market heavyweight Vodafone slid 13.7p to 218.9p after AT&T dismissed speculation linking it to a potential 60 billion takeover approach for the UK company.

Under takeover rules, AT&T is now prevented from making a move for Vodafone for six months, unless another party tables an offer for the UK company in the meantime.

Mike van Dulken, Head of Research at Accendo Markets said, however, the enforced pause might work in AT&T’s favour, allowing the share price of a new-look Vodafone to calm before another approach later in the year, and maybe even allowing it to swoop in with a lower bid.

Vodafone recently sold its US wireless joint venture to partner Verizon and is in the process of distributing the proceeds to shareholders via a big special dividend in cash and Verizon shares worth around 105p a share.

‘For VOD shareholders this is a setback given the recent share price run-up, however, with just under a month until the JV sale closes (shareholders vote tomorrow), we expect to see renewed interest now that the shares are back trading at levels not seen since early last October and the implied special div yield that little bit better. Shares off their worst levels of the morning. Not hanging up yet,’ van Dulken said.

Investment firm Hargreaves Lansdown was also under pressure today, losing 59.0p to 1,450.0p with traders citing news that rival Barclays Stockbrokers has announced a lower platform pricing model undercutting the FTSE 100 group’s move earlier this month.

Barclays is the latest direct dealing platform to reveal its new pricing, setting its charges at 35 basis points for all fund investments, in line with Fidelity and undercutting Hargreaves Lansdown by 10 basis points for smaller investors.

Outside the top flight, Premier Foods shed 4.25p to 139.5p as the Mr Kipling and Bisto owner said it would hand a controlling stake in its struggling Hovis bread business to American investor Gores Group for 30million.

The deal is expected to unlock 200million in investment for Hovis over the next five years, as well as enable Premier Foods to focus on its other brands.

And pawnbroker Albemarle & Bond slumped after it said attempts to find a buyer for the business had failed, casting further doubt over the future of the company. The stock halved by 9.5p to 9.7p as Albemarle said its attempts to secure a rescue were unlikely to carry much value for shareholders.

09.40: Investors were reeling from more bad corporate news today after energy firm BG Group issued a profits warning and US telecoms giant AT&T dismissed speculation it planned to buy mobile phones group Vodafone.

The updates combined with fresh fears over the health of emerging markets to push the FTSE 100 index 75.7 points lower to 6,587.9

The top flight fell by more than 100 points on Friday after a plunge in the value of Argentina’s currency sparked fears of a new emerging markets rout.

Vodafone drop: Shares in the mobile phones group fell sharply after US telecoms giant AT&T dismissed talk it could bid for the British firm

The risk-averse approach was also driven by this week’s Federal Reserve meeting, when policymakers may decide for a further reduction in the US economic stimulus programme.

Anita Paluch, trader at Varengold Bank said: ‘Emerging markets turmoil is seriously impacting the mood in Europe. Different countries, different issues, but it boils down to increased risk aversion and flight to safety. This mixture of economic and politic problems from different parts of the globe is spilling over and making traders brace for another day of increased volatility.’   

City traders said around 50 points of the session’s fall was due to just two stocks, with BG Group sliding 170p to 1,085p after it downgraded its earnings guidance for this year and next. It blamed ongoing production issues in Egypt.

And Vodafone dropped 11.85p to 220.7p after AT&T finally dismissed speculation linking it to a potential 60billion takeover approach for the UK company.

Outside the top flight, Premier Foods fell 8p to 135.75p as the Mr Kipling and Bisto owner said it would hand a controlling stake in its struggling Hovis bread business to American private equity firm Gores Group.

09.00: The Footsie dropped sharply in opening deals today, extending Friday’s slide in tandem with big falls global markets on worries that troubles in emerging markets could be exacerbated if this week’s Federal Reserve FOMC policy meeting further tapers its equity supportive bond buying measures.

The FTSE 100 index was down 73.8 points in early trade at 6,589.9. The UK blue chip index closed 109.54 points lower at 6,663.74 on Friday, its lowest finish since December 20 and its biggest one-day percentage drop this year after a move by Argentina’s central bank to cease propping up its currency through intervention in financial markets sent shivers through emerging and global markets.

Fed caution: This week’s Federal Reserve policy meeting could extend tapering of its bond buying programme

Jonathan Sudaria, dealer at London Capital Group said: ‘Of more immediate concern though will be this weeks FOMC meeting where we could see the rout in emerging markets go up a level as the consensus is that they will continue to roll back their tapering program; irrespective of the gyrations in markets.’

‘If they do reduce bond purchases by another $ 10billion, we will certainly see Ben Bernanke out with a bang as markets will probably over react with traders speeding up the tapering timeline and pricing in the whole thing immediately. Until then, expect nerves to get the better of traders and markets to stay under pressure.’

No UK economic news will be released today but data tomorrow is set confirm Britain as the strongest major economy in Europe, with fourth quarter growth figures expected to show the nation in its rudest financial health since the crash.

Economists expect data from the Office of National Statistics to show that output grew by 0.7 per cent in the fourth quarter of 2013, hot on the heels of the 0.8 per cent registered in the preceding three months.

That would mean annual GDP hit 1.9 per cent, the fastest rate since the financial crisis that engulfed the world in 2007 and well ahead of the meagre 0.3 per cent growth seen in 2012. It comes just days after the International Monetary Fund upgraded its outlook for the UK in 2014 from 1.9 per cent to 2.4 per cent, the second most optimistic prediction behind its outlook for the US.

And the recovery is feeding through to British households which have a growing sense of job security and declining fears that inflation is driving prices higher, according to the Markit Household Finance Index published today.

Stock to Watch include:

VODAFONE – Speculation linking the mobile phone giant to a 60billion takeover swoop from AT&T was shot down by the American firm today. Vodafone also said it is in talks to acquire Spain’s main cable operator Grupo Corporativo. And the Mail on Sunday reported that China Mobile has examined buying between 5 per cent and 20 per cent of Vodafone in the hope of setting up a joint venture, citing City sources.

BG GROUP – The group has declared force majeure in Egypt. It also says that total results for 2013, post impairments, will be around $ 2.2billion, or 65 cents per share, and gives guidance on production plans.

LLOYDS BANKING GROUP – Tens of thousands of customers of banks owned by the lender were unable to use their debit and ATM cards for several hours on Sunday as an apparent technical glitch hit its system.

BARCLAYS – The bank is considering ending its 40million-a-year sponsorship of English soccer’s Premier League when its current deal ends in 2016, according to the Sunday Telegraph.

RSA INSURANCE – The firm is understood to be considering scrapping its dividend to help to raise at least 500million to plug a hole in its balance sheet, according to The Sunday Times.

ARM HOLDINGS – The chip designer confirmed its chairman John Buchanan will step down and be replaced by Stuart Chambers.

PREMIER FOODS – The company said it has reached an agreement on a joint venture to grow bread unit Hovis, enabling it to dedicate its own focus to grocery. It also confirms that 2013 results will be in line with expectations.

AVEVA – The insurer says it has not seen a change in trend since November, and has continue to perform well.