The top share index <.FTSE> fell by midday on Friday, on track for its tenth successive trading day of losses as stress surrounding the euro zone's debt problems heightened after Italy paid record high yields in its most recent debt sale.
London's blue chip index <.FTSE> fell 11.95 points or 0.2 percent to 5,115.62 by 11:51 a.m., having fallen 7.5 percent over the previous nine sessions. The record for the FTSE 100 falling on consecutive trading days is 11, back in January 2003.
Riskier assets bore the brunt of the selling, after Italy in a bond auction, described as awful by one Dutch-based trader, paid a record 6.5 percent to borrow over six months and its longer-term borrowing costs soared far above levels seen as unsustainable for public finances.
Investors' concerns are that the region's crippling debt situation and lack of cohesive action from politicians in preventing contagion could cause the break-up of the euro zone and tip the global economy into recession.
Goldman Sachs said it expects the euro-area economy to slide into recession in the fourth quarter and forecasts just 0.1 percent growth for 2012, but funding difficulties for banks represent a clear downside risk to this forecast.
The banking sector's problems could at some point lead to a significant worsening of funding conditions for corporates and households, which in turn could turn the moderate recession we are forecasting into something more akin to the 2008/09 experience, the bank said.
The banking and mining sectors, which have become barometers for the outlook for the global economy, have lost more than a quarter of their value in 2011.
Nick Mustoe, chief investment officer at Invesco Perpetual, said it was difficult to call when the risk on/risk off environment will end given the global macroeconomic uncertainty.
The repricing of equities has been savage ... But we're not fully through the process. I expect there to be more earnings downgrades to come, he said.
Some share prices are beginning to discount a lot of bad news, so there are some opportunities to buy companies (on the cheap) with strong fundamentals.
The FTSE 100 now trades on a price to earnings ratio of 9.86 times, compared with a historical average of around 14 times, while it has a combined price-to-book ratio of 1.4, Thomson Reuters StarMine data shows.
The euro zone debt crisis and the austerity measures governments are undertaking to compact bulging debt piles, continues to hamper corporate earnings.
Outdoor goods retailer Blacks Leisure
Investec Securities said the results were at the lower end of expectations but it did not foresee downgrades. However, the broker said it viewed United Utilities
There appeared to be little respite on the horizon for equities, as Wall Street futures pointed to a lower open later on Friday in the U.S., despite the truncated trading hours following the Thanksgiving day holiday.
But HSBC said it is dangerous to be fully risk-averse as there is a possibility that equities recover surprisingly sharply and it wanted at least part of its portfolio to be positioned for such a situation.
The broker highlighted Rio Tinto
(Additional reporting by Tricia Wright; Editing by Jon Loades-Carter)