Financials under pressure as Greek default fears rekindled

BRITAIN’S FTSE 100 closed down yesterday with financials under pressure after a warning by German Chancellor Angela Merkel reignited fears of a Greek default, while GlaxoSmithKline fell on worries over its key lung drug Relovair.

London’s blue chip index closed down 37.42 points or 0.7 per cent at 5,612.26, with volumes just 88 per cent of their already weak 90-day average and as US equities gave up early gains.

Traders said FTSE 100 bulls also encountered technical resistance around 5,700 – a level the index failed to hold sustain last week -- and with the relative strength index indicating UK-listed blue chips were approaching overbought territory after last week’s 1.4 per cent gain.

Banks ebbed lower as investors mulled over the latest press conference from Angela Merkel and French President Nicolas Sarkozy, which traders said was “uninspiring”.

The main concern revolved around Merkel’s warning that Greece would not be paid its next aid tranche without rapid progress on its second rescue package.

Banks have already been asked to take a 50 per cent haircut on their Greek debt, and there are broader concerns over their balance sheets as European peer UniCredit’s capital raising plans failed to convince investors.

With Eurozone worries back to the fore, Barclays fell 4.5 per cent. Old Mutual dropped 1.4 per cent and hedge fund Man Group was down 4.8 per cent.