FTSE breaks winning streak on worries over Euro bailout

THE FTSE 100 share index snapped a four-day winning streak yesterday, as worries over Europe’s debt problems and the impact on the global economic recovery prompted investors to bank some of the recent gains made in commodity and financial stocks.

The index closed down 3.3 points, or 0.1 per cent at 5,395.70, but recovered from a session low of 5,330.42 as a robust opening on Wall Street ahead of the start of the third-quarter reporting season calmed investors nerves.

The FTSE 100 has risen almost 11 per cent in the last week, on hopes that Europe’s politicians were finally taking a grip of the debt crisis.

But jitters re-surfaced as a vote by Slovakia on expanding the Eurozone rescue fund was delayed after a Slovak ruling coalition party said it would abstain, forcing the government to turn to opposition parties to push through a deal.

Miners, whose earnings are most exposed to demand from the world's most voracious consumer of raw materials, was the worst performing sector on the FTSE 100, having risen near 20 per cent in the past four trading days in the wake of China’s move to support shares in its banks.

ENRC was among the hardest hit, falling 2.3 per cent. Silver miner Fresnillo fell one per cent, while on the FTSE Fledgling, Central Rand Gold tumbled 4.1 per cent. The firm is currntly appealling a decision by the South African government to strip it of its mining licences.

Barclays Capital remained concerned enough over future earnings among hoteliers to cut its rating on London-listed Intercontinental Hotels (IHG) to “underweight" from “overweight”.

IHG’s shares fell 0.6 per cent as the broker also made further cuts to earnings forecasts in a cautious note on the sector.

Elsewhere, Ben Gordon the chief executive of British mother and baby products retailer Mothercare said he would step down after last week's profit warning wiped a third of the value off its shares. The shares rose 9.2 per cent on the announcement.

Fund manager Ashmore fell almost two per cent on the back of a disappointing update on some of its funds.

Outside of the top flight, recruiter Robert Walters fell 5.8 per cent after it warned that the wobbly UK jobs market has dented its outlook for the year, despite a 13 per cent rise in quarterly profits.

Banks managed to continue their rebound as buyers continued to view the sector as relatively cheap, despite risks associated with their balance sheets and their exposure to European debt.

Royal Bank of Scotland and Barclays added up to 2.8 per cent as Greece’s international lenders said the country should receive a vital lifeline next month in order to avoid bankruptcy.

Louise Cooper, market analyst at BGC Partners, said some form of risk appetite appears to be back, highlighted by the continued selling of “safe” state bonds (in Germany, the UK and United States) that has coincided with a move upwards for equities.

Quoting a broker, she said: “The trader that was told to go and lie down in a darkened room if he had a buy idea may now be allowed to stay on the desk and [possibly] put the trade on”.