FTSE: 5,698.81 (–43.74) Mid-250: 11,631.85 (–131.58) Small Cap: 3,255.21 (–27.92)BRITAIN'S TOP shares fell sharply yesterday as fears over the global recovery and a contagion impact from the Greek debt crisis prompted investors to sell out of riskier assets such as commodity stocks.

The FTSE 100 ended down 43.74 points, or 0.8 per cent, at 5,698.81, back at levels last seen after the Japanese earthquake.

Investors were unnerved by Greece’s debt problems and a lack of agreement in the euro area on an aid plan, with the cost of insuring Greek debt against default hitting fresh record highs yesterday.

Fears of contagion were reflected by a move in Spanish 10-year government bond yields to 11-year highs after tepid demand at a Spanish debt auction.

“It’s the overall uncertainty that’s again getting hold of everyone and leaving us with literally nowhere to go,” James Hughes, senior market analyst at Alpari UK, said. “When a deal (for Greece) does come through, then of course you have to deliberate the overall problems that are still there, and of course . . . who’s going to be next?”

Commodity stocks bore the brunt of the sell-off as investors fretted about future demand for natural resources.

Among miners, Lonmin and Kazakhmys were the worst off, down 3.4 per cent and 3.3 per cent respectively, while BG led integrated oil stocks lower, off 1.4 per cent.

The market was dealt another blow in the form of a disappointing business activity survey from the Philadelphia Federal Reserve Bank, a day after negative New York State manufacturing data.

US blue chips, however, were up 0.7 per cent by London’s close, as bargain hunters moved in after a more than 7 per cent sell-off in the last few weeks.

Ratcheting up the pressure yet further, British retail sales fell more than twice as fast as expected in May, with economists’ near-term prognosis for the situation gloomy as consumers are faced with rising prices and slow wage growth.

Kingfisher and Tesco sank 1.5 per cent and 1.7 per cent respectively.

GKN shed 3.1 per cent after the British industrial and engineering group said a fatal explosion last month at an American plant it runs will result in a £30 million ($48.51 million) one-off hit to its profits. – (Reuters)