Shares fall amid inflation fears

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The Footsie opened more than 100 points higher as investors were buoyed by the US Federal Reserve's surprise move to cut interest rates and avert a recession.

But minutes of the Bank of England's latest rate-setting meeting showed concerns that the inflation outlook "had worsened markedly" amid soaring oil and food costs and imminent energy price hikes.

This dampened hopes that the Bank would be able to cut rates as sharply as the Fed to tackle a slowing economy, sending the Footsie more than 90 points down after the minutes were released.

The minutes of the Bank's Monetary Policy Committee meeting were revealed as official figures showed the UK economy's pace of growth easing to 0.6% in the final three months of last year. Traders digested the data ahead of further direction from US markets.

Martin Slaney, head of derivatives at GFT Global Markets, predicted Wall Street's Dow Jones Industrial Average will open at least 50 points lower.

Fears over a US recession have sent shockwaves through global stock exchanges since the beginning of the week.

On Monday, £77 billion was wiped off London's leading shares in the biggest one-day fall since the 9/11 terror attacks in 2001 - although the Fed's dramatic intervention triggered a partial recovery.

The Footsie is currently trading 12% below its opening level for 2008 and almost 16% lower than the seven-year highs above 6,700 achieved last June.

Bank of England Governor Mervyn King has also warned of a bleak economic outlook with rising food and energy prices possibly pushing inflation over 3%.