Banks peg back FTSE as Greece faces the abyss

The rally on the FTSE 100 stalled this morning after talks to address the Greek debt crisis appeared to be floundering with the threat of a default casting a shadow.

Financial stocks pinned the market back as Eurozone ministers yesterday rejected an offer made by private bondholders to help restructure Greece's debts, sending negotiators back to the drawing board.

The euro edged down from a three-week high and European shares opened lower across Europe today. Meanwhile UK domestic data showed that public borrowing was lower than forecast in December but that debt was still at a record high.

Equity markets were shaken after German conglomerate Siemens, a bellwether for Europe's manufacturing industry, reported a 23 per cent decline in its first-quarter core operating profit, missing the most pessimistic analysts' forecasts.

The pan-European FTSEurofirst 300 index of top shares opened down 0.7 per cent.

On London's blue chip index three heavyweight banks were all among the top five losers, with sentiment dampened by a downgrade on European rival Deutsche Bank by JPMorgan. Barclays slipped three per cent, Lloyds 2.8 per cent and RBS 2.4 per cent.

Fund manager Ashmore, down 3.3 per cent, was the steepest faller. The drop came after RBS cut its rating on the company to hold from buy.

Another significant loser was Cairn Energy with the oil explorer down almost three per cent after the company dropped plans to award chairman and founder Bill Gammell share options worth £2.5m bowing to pressure from investors.

However, resource companies overall performed well on the index. Essar Energy was up three per cent while International Power and National Grid both nudged up by more than one per cent.

Water company Severn Trent lifted by around one per cent while engineer Weir was one of the top gainers, up 2.3 per cent, as Goldman Sachs repeated its buy rating.

In Asia the Nikkei closed up 0.2 per cent and the Hang Seng 0.8 per cent.

Meanwhile Markit's Flash Eurozone Purchasing Managers' Composite Index (PMI), often seen as a growth indicator, jumped to 50.4 from December's 48.3, its highest reading in four months, in a boost for the bloc.