FTSE plummets into red territory for 2012 as Europe worries return

BRITAIN’S top share index plunged yesterday to its lowest level in three weeks and fell back into the red for the year as fresh Eurozone worries hit banks across the continent, while technical charts pointed to further weakness over the summer.

Eurozone concerns focused on Spain, whose ten-year sovereign bond yields spiked to more than 7.5 per cent, a euro-era high, after a second region looked to be in line to apply for a central government bailout.

That drove fears Spain might become the fifth Eurozone member in need of a sovereign rescue, spurred worries about the impact of further contagion to Italy and weighed on equity markets across the region.

Britain’s FTSE 100 closed at 5,533.87, down 117.90 points, or 2.1 per cent, with no individual stock posting a gain. The blue chips are now down 0.7 per cent for the year, going back into negative territory for the first time this month.

Even before yesterday’s sharp falls, the FTSE 100’s closing Friday level had implied a contraction in earnings per share of 5.7 per cent a year for five years, Thomson Reuters StarMine data showed, only slightly less bearish than the Eurozone’s leading index, the Euro Stoxx 50.

UK banking shares were among the worst performers, dropping 3.3 per cent in line with their European peers, as investors fretted about their holdings of Eurozone sovereign debt as well as loan book exposure in the region.

HSBC Holdings, down 3.5 per cent, was the biggest individual drag, taking about 13 points off the FTSE, as its share price neared a two-month low.