Collapse in US housing market shatters shares

Dismal housing market figures from the US caused fresh pain for investors today as they triggered a stock markets drop on Wall Street and in the City.

Figures released by the National Association of Realtors reported an unprecedented drop in sales of previously occupied homes in the US last month to a 15-year low. Total sales were down 27.2% to 3.83 million, far below the predicted 4.6 million.

The effect of the uncertain economic outlook rippled across the Atlantic, where the FTSE 100 Index dropped more than 2% on publication of the US data.

Wall Street's Dow Jones Industrial Average dropped nearly 2% in early trading, while the Nasdaq Composite fell 1.7% and the Standard & Poor's 500 Index declined 1.6%.

Teunis Brosens, an economist with financial services group ING, said: "These are truly dismal numbers, adding to the recent flurry of data suggesting that the recovery of the US economy is faltering."

Traders' nerves are unlikely to be soothed, with further figures due from the US on durable goods orders, consumer confidence and revised second quarter GDP due this week, as well as the latest speech on the state of America's economic recovery from Federal Reserve chairman Ben Bernanke.