FTSE hit by fresh Eurozone discord

BRITAIN’S leading share index was pulled lower by financials yesterday as political discord again hampered efforts to resolve the Eurozone debt crisis, leaving it on course to snap a three-week winning streak.

News of stalled talks between France and Germany to forge a “comprehensive” plan to end the crisis ahead of a meeting of regional leaders on Sunday weighed on sentiment.

An impasse over how to boost the firepower of the region’s rescue fund, the EFSF, could seriously weaken any deal, in spite of agreement that €100bn is needed to recapitalise the banking system.

The need to expand the bailout fund, to put a debt-market firewall around embattled Greece and prevent further contagion to bigger economies such as Italy, was highlighted yesterday as Italian 10-year bond yields passed six per cent.

Lloyds Banking Group led sectoral fallers, down 4.5 per cent, while Barclays fell 4.2 per cent. The STOXX Europe 600 Banks index ended down four per cent.

Trevor Coote, head of equity sales at Alexander David Securities, said fresh disagreement between France and Germany had disappointed some investors and more could be on the way.

“I think you’ll see the market drift and unless there’s some good news over the weekend, it’ll go lower on Monday. I’d expect a 10 per cent fall. It won’t go in a straight line. You’ve got good support at 5,000 and again at 4,800,” he said.

By the close, the FTSE 100 index was down 1.2 per cent, or 65.81 points, at 5,384.68, more than reversing the previous session’s 0.7 per cent gain and leaving it down 1.5 per cent this week, on course to snap a three-week rally.