THE FTSE 100 fell for a fifth day yesterday, retreating further from five-year highs and posting their longest downturn in 10 months as lack of resolution on a rescue for Cyprus rattled markets.
Investors initially took a fairly benign view of the Cyprus crisis, but have been unsettled by parliament's rejection of an EU bailout that would have taxed savings and the absence of any immediate sign that Russia will step in with fresh cash.
The European Central Bank has given Cyprus until Monday to raise the money it needs to secure a bailout, or face losing emergency funding for its crippled banks.
Although Cyprus accounts for only around 0.2 per cent of the euro zone economy, the crisis there has cast the spotlight back onto the problems in the region and dampened appetite for risk assets across the globe.
The FTSE 100 closed down 44.15 points, or 0.7 per cent at 6,388.55 points, extending its retreat from a five-year peak of 6,533.99 points hit earlier this month.
With the index still up 8.4 per cent so far this year, traders said more profit-taking could be expected in the run up to quarter-end and a four-day Easter weekend next week.
Data showing an unexpected downturn in the euro zone manufacturing sector this month – even before the Cyprus crisis took hold – added to a gloomy mood in Britain, which counts the single currency bloc as its top trading partner.
Financials, the UK sector most directly linked to any problems in the euro zone and its banks, were among the biggest weights on the FTSE 100, taking six points off the index.
Heavyweight energy companies also weighed, as Cyprus worries pushed down oil prices.
The euro zone concerns sent sterling to five-week highs versus the euro in another potential negative for UK blue chips, who had been benefit ting from the translation effects of the weak currency on their foreign earnings.
Volumes on the FTSE, though, remained relatively subdued, at just 83 per cent of the 30-day daily average.
The scale of the weakness was also relatively modest when compared to previous bear markets rather than to the fairly steady uptrend in place since last summer.
The FTSE 100 has lost just 1.6 per cent over the last five sessions, compared to a drop of 5.5 per cent over the same number of days last May.
As a result, technical charts suggest it is too soon to call an end to the broader up-trend and turn bearish.
“I think we are still in a bull market but I am really worried to be buying at these levels,” said GFT Global Markets technical analyst Fawad Razaqzada.