Dow plunges 1% on fresh recovery fears

The Dow Jones has fallen for the first time in three days as Consumer Price Index figures show the Fed’s $1trn injection into the banking system has not led to faster inflation.

The figures reveal the cost of living in the US was unchanged in July as the recession continues to sap firms' pricing powers.

Analysts also fear the rally in the S&P 500 Index, which reached a ten month high, has outpaced the US economy's recovery prospects, dragging the Dow Jones down 97.95 points (1.04%) to 9300.24 at 3pm.

Boeing Co has fallen 3.88% to $44.81 as it said it stopped work more than a month ago on a project due to a fault. Intel has tumbled 1.63% to $18.74.

However, consumer brands Coca-Cola Co and Wall Mart Stores Inc have bucked the downward trend, up 0.43% to $48.33 and 0.33% to $52.05.

In the UK, the FTSE has fallen 37.18points (0.78%) to 4718.28 as investor confidence was knocked by negative sentiment in the US.

Old Mutual has fallen 4.21% to 89.9p, while Prudential has slumped 3.21% to 512.5p.

However, buoyed by talk of investment from the Middle East, British Land Co has added 5.15% to 518.5p. Balfour Beatty has gained 1.83% to 351.5p.