Cyprus worries weigh down on FTSE 100 shares

LONDON REPORT

BRITAIN’S top shares closed lower in a choppy session yesterday, with Cypriot banks due to reopen today and fears growing that the Eurozone is slipping back into crisis.

A Greek newspaper reported the island will impose a ban on cashing cheques and limit the amount of cash that can be taken out of the country under measures to avert a run on its banks.

London’s blue chips have fallen 1.6 per cent since the full extent of Cyprus’s problems became known two weeks ago, with investors increasingly worried that its bailout outlines a new template that will make the private sector pay more for future Eurozone rescues.

London’s blue chips closed down 11.81 points, or 0.2 per cent at 6,387.56, above the intraday low of 6,344.19 and bouncing off 6,380, its three-month rising support level – one technical measure of support for a market that is trending up when viewed in the longer term.

“Tight capital controls in Cyprus will likely prevent the hemorrhaging of funds in the short term,” Matt Basi, head of Premium client management at CMC Markets, said.

“But with a four day (Easter) weekend in store and the propensity of European politicians to misspeak on matters of international importance, investors can not be blamed for taking a slightly more cautious approach,” he said.

Top risers on the FTSE 100 were the more defensive health care and consumer staples sectors – companies which provide products and services that are less affected by austere macro economic conditions.

Cyprus probably won’t be the last Eurozone country to ask for an international bailout, according to a poll of economists, who cited Spain and Slovenia as the likeliest candidates.

Financials were the sharpest fallers yesterday, given their exposure to Europe’s debt crisis.

Interdealer broker ICAP shed 6.3 per cent after issuing a profit warning as the crisis dashes hopes of the buoyant trading volumes of early this year continuing.

Britain’s largest insurer Prudential fell 4.3 per cent after the company was fined £30m for failing to tell the UK financial regulator about its ill-fated takeover attempt of Asian rival AIA around three years ago.

Royal Bank of Scotland fell 3.1 per cent with Investec reminding investors the bank will be “encouraged” to issue around £450m of dilutive fresh equity in 2013 and saying its valuation had become stretched.

Elswhere, British Airways owner IAG fell 2.3 per cent after it raised its takeover offer for budget airline Vueling to €9.25 euros per share, up from €7.