Banks in retreat after Portugal downgrade

The FTSE 100 lost ground on opening today after Moody's cut Portugal's credit rating to "junk" sending banking shares down.

As the Eurozone crisis deepened investors abandoned risky equities as banks' exposure to the crisis in the eurozone came under the spotlight.

The euro fell sharply after the Moody's four-notch downgrade to Ba2, with the ratings agency warning that Portugal may need a second round of rescue funds before it can return to capital markets.

On London's blue chip index RBS was down 3.5 per cent and Barclays 2.16 per cent. Lloyds lost two per cent, while HSBC slipped by 0.3 per cent.

Other notable fallers were advertising giant WPP, down 1.7 per cent, while British Land was down by a similar level in early trading. The company is in advanced talks to buy a £175m of properties that are currently occupied by Virgin Active health and racquet clubs.

The top risers were safety testing company Intertek and outsourcer Serco, which both lifted by around 1.4 per cent. Tullow Oil was also on the climb, up one per cent, after yesterday reporting that it expected to hit record revenues on the strength of its African interests.

Chipmaker Arm Holdings rose by 0.9 per cent, with credit expert Experian also among the top climbers.

DS Smith jumped 2.6 per cent after the packaging company said Spain's Unipapel has offered to buy its European office products wholesale business Spicers for £200m.

Retailer Sports Direct edged up on the FTSE-All share index after announcing a £7m move into the premium clothes market.

European markets overall were on the back foot after seven straight sessions of gains — sparked by more positive news from Greece, which has secured more life-saving bailout funds after voting through austerity measures. Portuguese bank Millennium dropped 4.3 per cent.

But the Nikkei average rose to a post-quake high on closing today, gaining for a seventh session in its longest winning streak in two years, helped by continued buying by Asian and European investors.

In domestic economic news the Halifax reported a surprise rise in house prices in June.

However car sales plunged 6.2 per cent in June compared with the same month last year.