London - The London stock market retreated Wednesday after two days of gains as recession fears came to the fore, analysts said.

The Financial Times Share Index (Footsie) was 2.6 per cent down in early trading, with the downward trend continuing throughout the morning session.

Losses peaked at over 4 per cent at lunchtime but the Footsie readjusted at 3.17 per cent, or 139 points, down after trading opened in Wall Street.

Traders said an "inevitable reversal" was under way as positions were reassessed after the boost of the past few days, following the massive government support packages.

But there was also concern at the renewed signs of a looming recession as figures showed that unemployment in Britain grew to 1.79 million over the summer months - before the banking crisis hit home.

Experts predicted Wednesday that British unemployment, which had been significantly lower that in other European countries, could reach 2 million by Christmas. (dpa)