Irish bailout concerns hit FTSE hard

BRITAIN’S top share index recorded its biggest fall in three months yesterday as concerns over Irish government debt and the prospect of another euro zone bailout dragged banking and commodity-related stocks lower.

At the close the FTSE 100 was down 138.51 points, or 2.4 per cent, at 5,681.90, its biggest daily fall since 11 August.

Banks were the worst hit sector, with Lloyds Banking Group and Standard Chartered shedding 4.7 per cent and 4.4 respectively.

Ireland has so far resisted calls to request a state bailout, as Greece did in May, and insisted only its banks need assistance, despite government bond yield spreads blowing out to record levels in recent weeks.

“This will be a continual rollercoaster over the next few weeks. It's a broken record, but markets hate uncertainty,” said James Hughes, analyst at CMC Markets.

“Metal prices and commodities are all going down on the back of the Irish story and fears of yet another euro crisis rearing its head. And no-one knows what sort of exposure the banks have got to Irish debt.”

Elsewhere among financials Man Group was a big faller, off 4.4 per cent, with traders saying that its flagship AHL fund was having a tough week.

Mining and energy stocks were also knocked by lingering fears of interest rate hikes in China, the world's largest commodities consumer.

Also weighing on confidence was weaker-than-expected data out of the United States where core producer prices recorded their largest decline in more than four years and November homebuilder sentiment was up less than expected.

Earlier, inflation in Britain rose unexpectedly to a four-month high in October.

Rexam was the standout FTSE 100 riser, adding 2.3 per cent, after the drinks can maker said it expected its second half results to be in line with its expectations, prompting Seymour Pierce to repeat its “buy” rating on the stock. Capita Group, up 0.5 per cent, was also boosted by positive broker sentiment after Numis Securities lifted its rating on the outsourcer to “buy” from “add”.