London loses ground amid lingering concerns over Italian and Greek debt

FTSE:5,519.04 (–26.34) Mid-250:10,347.76 (–41.54) Small Cap:2,816.47 (+15.47)

UK STOCKS declined yesterday, erasing last week’s gains on the benchmark FTSE 100 Index, amid concern that the new leaders in Italy and Greece may not be able to push through the measures required to stem the debt crisis.

The FTSE 100 declined 0.5 per cent in London. The gauge added 0.3 per cent last week as Italy’s senate approved debt-reduction measures and Greece named a new national-unity government.

The new administrations in Italy and Greece “are likely to be short-lived and may lack the legitimacy to push through reforms”, Dan Morris, a global strategist at JPMorgan Asset Management, wrote in a report. “With elections expected some time over the next six months, there will be ongoing doubt about the ability of the governments to pass and implement austerity and growth packages.”

Mario Monti, a former European Union competition commissioner, was named Italy’s new prime minister, boosting confidence in the country’s ability to cut the euro area’s second-biggest debt.

Italian bonds yesterday fell for the first time in three days after the nation paid the highest yield since June 1997 at a debt sale, highlighting the challenge facing the new government to win over investors.

Bonds declined even as the European Central Bank was said to buy the securities yesterday, according to two people familiar with the transactions.

Majestic Wine fell 3.9 per cent to 400p, its lowest price since April, after saying its October sales were worse than expected.

Schroders slid 2.2 per cent to 1,362p.

Highland Gold Mining fell 5.7 per cent to 181p after the company reduced its production guidance for gold this year.

Premier Foods slumped 11 per cent to 5.74p after UBS downgraded the shares to “sell” from “neutral”.

Smith Nephew rose 2.6 per cent to 572.5p after Exane BNP Paribas upgraded the stock to “outperform” from “neutral”.

Purecircle rallied 17 per cent to 112p after getting regulatory approval for the use of steviol glycosides in foods and beverages in Europe.

Gulf Keystone Petroleum climbed 1.6 per cent to 180p and Petroceltic International rose 8.8 per cent to 8.16p, leading gains among oil explorers operating in Kurdistan. – (Bloomberg)