Merkel helps send FTSE into retreat

MINERS and banks retreated as Britain’s FTSE 100 fell yesterday after comments from the German chancellor led to concerns over how far European leaders would go to solve the region’s debt crisis.

Chancellor Angela Merkel said Germany opposes a phrase in a draft conclusion for today’s EU summit that calls for the European Central Bank to continue buying bonds in the secondary market.

Adding to the downbeat sentiment was news that a meeting of EU finance ministers this week was cancelled, but analysts noted the meeting is not the EU summit, which is still on.

The UK’s benchmark index fell 22.52 points, or 0.4 per cent to 5,525.54, having closed at a two-and-a-half month high on Monday, tracking losses across Europe and in the US.

A London-based trader said that, should an agreement be reached, the market could rally up by a further 300 points, with most gains already built in to the market.

If an agreement fell short of expectations the market could retreat 10 per cent, the trader added.

Further eroding investor confidence, US consumer confidence unexpectedly dropped in October to its lowest level in two-and-a-half years, again raising concerns over the health of the world’s biggest economy.

That led to profit taking in riskier assets such as mining and banking stocks, which have had a minor recovery over the past month as the market has moved higher.

Glencore fell 2.6 per cent as analysts at Jefferies said the outperformance of the shares has improved the economics of a bid for miner Xstrata and means a deal could be “win-win”.

Banks took more than seven points off the index, while real estate investment trusts Hammerson and British Land shed 4.2 per cent each.