FTSE falls on uncertainty over Greek debt, government and Chinese inflation

BRITAIN’S top share index fell yesterday as concerns over the Eurozone’s rescue package, monetary tightening in China and political uncertainty in the UK hit investor sentiment.

The FTSE 100 index closed down 53.21 points, or 1 per cent, at 5,334.21, having gained 5.2 per cent on Monday after an emergency rescue package from the European Union initially quelled fears a new credit crisis would derail European economies.

“Now that the euphoria of the rescue package has been digested, traders are quickly coming to the conclusion that the Euro zone faces severe fiscal cuts and an uncertain growth outlook and this is why yesterday’s gains were short lived,” said Joshua Raymond, market strategist at City Index.

Risk-sensitive banks, which potentially have huge exposure to the euro zone debt crisis, were the biggest fallers, with Barclays, HSBC, Lloyds Banking Group and Standard Chartered shedding 1.2 to 3.1 per cent.

Royal Bank of Scotland saw the sharpest losses, down 3.4 per cent, hit additionally by a Deutsche Bank downgrade.

Relief at the European Union’s bold move to restore investor confidence gave way to doubts about whether weaker euro zone economies can meet their part of the bargain and deliver drastic debt cuts.

Miners fell in tandem with metal prices as inflation in China hit an 18-month high in April, sparking fears of potential monetary tightening measures, which cast a shadow over the outlook for demand.

Xstrata, Vedanta Resources and Kazakhmys were the worst off, dropping 3.9 to 4.2 per cent. Randgold Resources topped the FTSE 100 leader board, rising 5.2 per cent.