Latest Japan quake knocks FTSE despite banking gains

BRITAIN’S top share index fell yesterday after a second large earthquake to strike Japan within a month knocked investor confidence, with traders wary of further losses once Asian markets open.

The FTSE 100, which fell more than four per cent after the March earthquake in Japan, closed down 33.76 points or 0.6 per cent at 6,007.37.

“Investors have fled risk immediately and it will be interesting to see how Asian markets react overnight as more news filters through, that could have a large bearing on how we open tomorrow,” one London-based trader said.

Risk sensitive miners and integrated oils were the biggest weights on the index, while the biggest FTSE 100 rise was temporary power supplier Aggreko, which offered its services to Japan following March’s quake. The stock closed up 1.4 per cent.

Brent crude pared losses, edging back towards multi-year highs. But strategists said global growth remained on track despite worries over the economic impact of higher oil prices.

“The base case of robust global economic growth remains intact but uncertainty and downside risks have considerably increased on the back of the shifting nature of the oil shock,” said Koen Straetmans, senior investment strategist at ING.

Vedanta Resources and Cairn Energy fell 2.6 per cent and 2.3 per cent respectively after they extended the deadline for a $9.6bn (£5.9bn) acquisition of Cairn’s Indian assets, a day after the Indian government deferred a decision on the deal.

“Although clearly a disappointment and likely to result in some further weakness, the deal is not yet dead,” brokerage Collins Stewart said in a note on Cairn Energy.

Engineer GKN was the top faller in the FTSE 100, losing 4.5 per cent to break a two-week winning streak.

HSBC was one of the top risers, gaining 1.03 per cent. Strength in banks helped cushion losses on the blue chip index after Portugal followed Greece and Ireland in asking for financial aid after months of what many economists said was a refusal to acknowledge economic reality.

“At this stage, the admission is a relief ... The delaying was sowing an unnecessary level of uncertainty,” said Caroline Vincent, who manages the £41m European Fund at Cavendish Asset Management.

Vincent also discounted the likelihood that Spain would follow suit. “The sort of pressure that would be required to push Spain into the same situation would have to significantly exceed the levels of pressure so far seen to have been exerted on the three bailout nations.”

The Bank of England kept interest rates at a record low of 0.5 per cent, while the European Central Bank raised rates by 25 basis points to 1.25 per cent despite debt concerns among Eurozone countries. Both decisions were widely anticipated by investors and had little impact on the market.