Markets hit by Eurozone contagion fears

Banks were the weakest link on the FTSE 100 this morning as the move towards a coalition government in Greece failed to impress wary investors.

Greek Prime Minister George Papandreou, who attempted to call a referendum on a crucial European Union bailout plan, will stand down when the new government takes over.

Eurozone ministers meet in Brussels later and the Greeks were frantically looking to have the details of how the coalition will work finalised.

Meanwhile investors were also shifting their attention to debt-laden which Italy which is being dragged down by political instability, with Silvio Berlusconi clinging onto power.

The cost of Italian borrowing rose in early trading as the turmoil further took its toll on confidence. The yield on Italian 10-year bonds rose from 6.37 per cent to a euro-era high of 6.66 per cent.

In London Barclays was down 3.7 per cent, RBS 3.2 per cent and Lloyds three per cent. Investment bank Schroders was off by 3.2 per cent.

The biggest faller was engineer Weir Group whose stock was dented by 4.4 per cent after a market update failed to impress investors.

BP was down 1.7 per cent after reporting that a £4bn deal to sell a stake in oil producer Pan American Energy had collapsed.

Miners also took hits with Rio Tinto dropping more than three per cent along with Kazakhmys with Anglo American dipping by 1.3 per cent.

On the FTSE All-share Ryanair stock was up four per cent after the airline raised its profit forecast for the year by 10 per cent

Shares at struggling Premier Foods were up 15 per cent after the company said that tests on its loan covenants had been deferred until March.

Carphone Warehouse was up 2.6 per cent after announcing that it was selling its stake in a US joint venture with Best Buy.

In Asia markets were unimpressed with the Greek debacle, with the Nikkei closing down 0.3 per cent and the Hang Seng 0.8 per cent.

Across the Atlantic later the US employment index for October will be released with September consumer credit figures also due for release.