FTSE falls sharply as credit fears return (FT.com)

London equities fell sharply in opening trade on Wednesday, tracking overnight losses on Wall Street and in Asia on returning fears about the implications of the US subprime credit crisis.

The FTSE 100 started the session 2 per cent weaker at 6,231.0, a broad-based loss of 130 points dominated by mining and oil stocks. Mid-cap investment stocks were hit hard by the resurgent sell-off, contributing to 2.5 per cent decline on the FTSE 250, a fall of 285 points.

Overnight in New York, equities moved sharply lower as more financial companies revealed the extent to which they had been drawn into the subprime mortgage crisis.

MGIC Investment and Radian both disclosed that their holdings in a subsidiary, Credit-Based Asset Servicing and Securitisation, were "materially impaired". American Home Mortgage Investment fell rapidly as trading in its shares resumed.

Overall, the Dow Jones Industrial Average lost intraday gains to finish 1.1 per cent weaker at 13,211.9 a decline of 146 points, with the broader-based S&P 500 1.3 per cent lower at 1,455.3.

Back in London, Cadbury Schweppes (NYSE:CSG) was the biggest blue-chip faller, down 5 per cent to 589p, after the world's biggest confectioner reported lower interim profits. The persistent volatility on debt and equity markets has raised doubts about its plans to sell its soft drinks unit, but the company said a sale was still its preferred option.

The UK's biggest mortgage lender, HBOS, fell 3.8 per cent to 932.5p after it said its share of the home-loan market slipped to 8 per cent.

Mining companies featured heavily on the list of falling shares, with gains from the faltering recovery rally, made during the previous session, all but wiped out. BHP Billiton (NYSE:BHP) lost 4.7 per cent to £14.04, Antofagasta fell 4.7 per cent to 694½p and Rio Tinto was 4.4 per cent weaker at £34.45 .

British Airways lost 1.2 per cent to 417.9p after it agreed to pay a fine of £121½m to UK regulators to settle allegations of collusion centered on fuel surcharges. It said news of a further fine, payable to the US Department of Justice, would break later in the session with the total cost in line with existing guidance of up to £350m.