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Eurozone debt fears weigh on FTSE as investors flee from risky asset classes

MOUNTING fears on Eurozone debt and doubts about the global economic recovery sent investors fleeing from riskier assets, shoving Britain’s top share index 1.7 per cent lower by close yesterday.

In a volatile session, the FTSE 100 ended down 84.95 points at 5,073.13, its lowest close since 5 February having fallen 2.8 per cent on Wednesday.

But the index fell as much as three per cent and touched a low of 5,000.76 in heavy trade, with 140 per cent of the average of the last 90 days transacted.

The inability of Eurozone leaders to agree on policy, highlighted by Germany’s unilateral decision on Tuesday to ban naked short-selling, has ramped up fears about whether the bloc will be able to effectively tackle its debt crisis.

This has hit the euro, lifted the yen and US Treasuries and contributed to a 9.3 per cent fall for Britain’s blue-chip index this month, on track for its biggest monthly fall since March 2009.

Miners, among the most sensitive stocks to risk aversion, were the biggest drag on the index, hurt by weaker metal prices.

Rio Tinto and Xstrata fell 3.6 and 2.7 per cent respectively, while Kazakhmys and Vedanta fell 5.8 and 4.3 per cent respectively.

Investors, already rattled by worries on the Eurozone debt crisis, were further unnerved by weaker then forecast US employment data released in afternoon trade.

Banks, already one of the biggest casualties of the sovereign debt problem in Europe, retreated again. Barclays, Royal Bank of Scotland and Lloyds Banking Group fell 0.8 to 2.5 per cent.

Among a meagre list of gainers, BT, gained 0.5 per cent.