Banks and commodities fall as Greek debt crisis lingers
BANKS and commodity stocksdragged Britain’s top index lower yesterday, as Greece’s lingering debt crisis looks likely to stall the FTSE’s progress near-term, analysts said.
Investors reacted negatively after European finance ministers postponed a final decision on extending a further €12bn in emergency loans to Greece.
The International Monetary Fund weighed in, saying it needed to be sure Greek reforms are on track and will be financed by the Eurozone, before the lender can pay out its part of the next aid tranche for Athens.
The FTSE 100 closed down 21.55 points, or 0.4 per cent, at 5,693.39, having shed 0.9 per cent overall last week, its fourth straight week of losses, on concern about global economic growth and the Eurozone debt crisis.
“There is clearly a shortage of good news about and the factors we see in front of us indicates that we are going to be in negative territory on and off for some considerable time,” Howard Wheeldon, strategist at BGC Partners, said.
Wheeldon, however, noted the FTSE has not moved far from levels of 18 months ago and he said the index will “bob around like a cork in a rough sea for a long time yet,” forecasting the FTSE 100 to close around 5,800 by year-end.
Part state-owned lenders Royal Bank of Scotland and Lloyds Banking Group were among the biggest fallers on the FTSE 100, off 4.4 per cent and 2.5 per cent respectively.
Insurers fell, with RSA Insurance off 1.6 per cent as UBS cut its rating on the stock to “neutral” in a downbeat review of the sector on concerns over exposure to government and banking debt.
Energy stocks and miners , tracking commodity prices lower, fell as investors became more risk averse on the back of the Greece concerns.
ENRC, however, rose 1.5 per cent, buoyed by a Goldman Sachs initiation at “buy” with a 1,100 pence target price, citing its product mix, emerging market exposure and low cost base.
Engineers took a bashing, led by mid cap Charter International, which was down 25 per cent after saying full-year results will be below expectations. Peel Hunt downgraded its rating for the stock to “hold”.
Blue-chip peer IMI shed 1.3 per cent, while mid-cap Cookson Group lost 4.6 per cent.
Among blue-chip gainers, satellites operator Inmarsat was the top riser, up 4.6 per cent, on media reports of a contract between its US partner LightSquared and telecoms firm Sprint.
Investec Securities said the contract could be worth up to 150 pence per Inmarsat share.
Market heavyweight Vodafone added 1.7 per cent, also on potential US catalysts as the Financial Times’s Lex column highlighted a thawing of relations between the British company and US partner Verizon.
International Airlines Group extended Friday’s gains, which followed an upgrade from broker Davy, rising 2.1 per cent, boosted by falling oil prices.
London’s blue chip index bounced off a session low of 5,647.23, helped by Wall Street rising at the UK close.
Atif Latif, director of trading at Guardian Stockbrokers, said: “The FTSE 100 held at 38.2 per cent Fibonacci retracement of the rally from last summer at 5,593.72. If this holds again then we see upside potential.”