FTSE Falls 3.2 Pct To Close Below 4,000

The FTSE 100 fell 129.31 points to 3,889.06, for a loss of 7.2 percent this week.

Britain's leading share index tumbled 3.2 percent on Friday to close below 4,000 for the first time in three months, led by commodity stocks and banks on concerns that the global recession is deepening.

The FTSE 100 fell 129.31 points to 3,889.06, for a loss of 7.2 percent this week. The UK benchmark is down 12 percent this year after shedding more than 31 percent in 2008.

Oil and gas producers took the most points off the index, as crude prices fell on deteriorating global economic outlook.

BP, Royal Dutch Shell, BG Group, Cairn Energy and Tullow Oil lost between 1.5 and 4.3 percent.

Mining stocks were also weaker as the economic gloom hit base metal prices and Anglo American slumped nearly 17 percent to top the FTSE 100 losers' list after scrapping its 2008 dividend and cutting 19,000 jobs.

Kazakhmys, Rio Tinto, Xstrata, Vedanta Resources, Antofagasta and Eurasian Natural Resources sank 6.4 to 10.6 percent.

"There is still this ridiculous belief that we are going to get instantaneous fixes to what took six to seven years to brew up into asset bubble," said Manus Cranny at MF Global Spreads.

"None of these measures that have been announced are going to produce instantaneous fixes. This market needs to realise this quickly."

Cranny also said the market had to recognise that companies were burning cash at a "substantial rate" and should expect more capital raising.

Banks also fell heavily as investors fretted anew about the threat of nationalisation. Rumours of nationalisation hammered U.S. bank shares, with Citigroup, down 22 percent, among the hardest hit.

In the UK, Barclays, Lloyds Banking Group, HSBC and Standard Chartered sagged between 0.9 and 5.8 percent.

Royal Bank of Scotland slumped 11.5 percent. The bank is exploring the potential sale of its Asian banking units as it looks to raise cash following its ill-fated purchase of ABN AMRO, sources said.

Mid-cap lender Cattles lost nearly three quarters of its value after warning full-year profit would be substantially lower than market expectations due to a review of its impairment provisions.

REALITY CHECK

"The market is falling because it is getting in tune with reality. It's a reflection of the deterioration in the global economy and the impact that will have on earnings, which is why this downturn has some way to go," said Peter Dixon, UK economist at Commerzbank.

Safe-haven buying lifted U.S. gold futures to a seven-month high above a key psychological level of $1,000 an ounce.

British retail sales, however, unexpectedly rose in January as shoppers took advantage of aggressive price cuts to stock up on new clothes, books and CDs in the post-Christmas sales, but the outlook is grim.

Marks & Spencer, Next, Kingfisher and Home Retail dropped 0.1 to 3.5 percent.

Insurer Prudential was one of the six gainers, up more than 11 percent, after it said it will sell the bulk of its business in Taiwan to China Life.

Within the insurance sector, Old Mutual and Aviva rose 2 and 1.3 percent respectively.

BAE Systems put on 1.3 percent after Credit Suisse lifted its price target on the defence contractor.