Footsie hits 15-month low as Barclays dips on Athens debt default worries

 

FTSE: 4,944.44 (–131.06) Mid-250: 9,425.93 (–324.63) Small Cap: 2,709.70 (–80.66)BRITAIN’S TOP share index hit a 15-month closing low yesterday, with banks and commodity stocks leading a broad-based sell-off, as growing doubts over Greece’s ability to stave off a debt default triggered fears of financial turmoil.

The UK benchmark ended down 131.06 points, or 2.6 per cent, at 4,944.44, its lowest close since July 5th, 2010.

Markets drew some comfort after US Federal Reserve chairman Ben Bernanke said the Fed is prepared to take further steps to help an economic recovery that is “close to faltering”.

But uncertainty over Europe dominated sentiment, with investors concerned that European officials would be unable to prevent Greece’s fiscal crisis from turning into a global banking crisis.

Banks were left nursing hefty falls. Barclays dropped 7.6 per cent, while Lloyds Banking and Royal Bank of Scotland shed 4.9 per cent and 4.2 per cent respectively.

In a meeting in Luxembourg, euro zone finance ministers said they were reviewing the size of the private sector’s involvement in a second bailout package for Greece, a move that could hasten the threat of a debt default.

“Politicians are two months behind reality, and their lack of clear leadership in the euro zone is spooking the markets,” said David Miller, partner at Cheviot Asset Management.

“Investors can’t see any reason to rush into investments at the moment and they are not being soothed by patchy announcements which offer words not actions,” he said.

Goldman Sachs economists lowered their global growth forecasts and now expect growth of 3.5 per cent in 2012, compared with 4.2 per cent previously.

Miners were a major weight as Lonmin shed 5.3 per cent and Anglo American fell 3.4 per cent. Credit Suisse downgraded their respective ratings to “underperform” and “neutral”.

Industrials IMI and Weir were the FTSE 100’s biggest fallers, both down more than 7 per cent.

Among individual movers, International Airlines dropped 3.4 per cent on growing fears that its transatlantic partner American Airlines is headed for bankruptcy.

Tesco headed a short list of gainers, up 2.6 per cent, as UBS upgraded its rating for the retail group to “buy”. – (Reuters)