Blue-chip reshuffle in doubt as US attacks prompt 6% fall in FTSE 100

The quarterly reshuffle of the FTSE indices, due today, is in doubt after the FTSE 100 collapsed 287.7 points in the wake of yesterday's terror attacks in the United States.

There were fears the shake-up, to be based on last night's closing values, could have been distorted by the afternoon's frantic selling in global markets.

The London stock market suffered its worst fall since the crash of October 1987 as hundreds of billions of dollars were wiped off the value of the world's shares. Stock, currency, bond, gold and commodity markets went into turmoil as news broke of the terrorist attacks.

Analysts said the effect on activity and consumer confidence, especially in the US, could tip the already fragile world economy into recession.

In London the FTSE 100 index fell 5.7 per cent, wiping more than £60bn off the value of shares. "Investors will be wondering if this is the start of a terrorist campaign on the US aimed at high-profile institutions," said Andrew Milligan, head of global strategy at Standard Life Investments.

British Airways, which fell 21 per cent, and the airports operator BAA, down 16 per cent, were among the largest fallers as flights into the US were suspended.

Hotel companies fell on fears of a slump in tourism, banks fell as the financial markets dropped and so did insurance companies as the scale of the damage became apparent. P&O Princess Cruises, whose shares fell 15 per cent on fears of a slump in tourism, lost its expected place in the reshuffled FTSE 100 as a result. FTSE, the operator of the market, said its review committees would meet today as planned to review the data, but they may decide to suspend a decision on constituent changes.

The changes to the FTSE 100, if they do go ahead, will mark a symbolic end to the telecoms, media and technology investment bubble. Eight stocks are set for demotion, led by Marconi, the telecoms equipment giant. Spirent would also be ejected. The other stocks to be sent down looked likely to be: Carlton Communications, CMG, Misys, Energis, Colt Telecom and Telewest. Friends Provident, the recently-floated insurer, is expected to head the list of new FTSE 100 members. The new index will have an older economy feel, with the utilities Severn Trent and Innogy also entering. The other entrants would be: Wolseley, Enterprise Oil, Man Group; British Land; and Northern Rock.

There was panic in markets across the globe. Trading on the New York Stock Exchange and the Nasdaq were suspended. The US Federal Reserve said it was standing by to provide liquidity during the crisis.

The price of oil surged more than 13 per cent, or $3.60, to more than $31 a barrel on fears of a blockade on oil supplies in the Middle East if the Bush administration launched revenge attacks on Muslim targets. In London, oil stocks such as Shell and BP rose on the news. Lawrence Eagles, an oil analyst at the brokers GNI Research, said it was a "kneejerk reaction". "The assumption is that a retaliation will bring with it implications for the world oil price," he said.

A sustained surge in the oil price would add to the stress on the fragile global economy, coming at a time when the US is on the brink of recession. Mike Lenhoff, chief portfolio strategist at the stockbrokers Gerrard, said: "If you want to talk about hard-ball cold facts, [the attacks] will disrupt activity. But it is hard to believe that this will have a long-term impact."

The dollar tumbled, falling 1.5 per cent against the euro to 91.13 cents, from 89.80.

Gold, which is a safe haven for investors in times of civil unrest, war and financial turmoil, soared 7 per cent to its highest level in three and a half months.