Greek Debt Again Takes its Toll on European Shares
Concerns over a Greek bailout overshadowed central bank rate decisions and reassuring UK economic data today
The FTSE 100 index shed 49.4 points, or 0.9%, to settle at 5,712.7, while the FTSE 250 index lost 43.3 points to close 0.4% lower at 10,376.9.
European finance minister had hoped that their pledge to provide emergency funding should Greece require it would provide enough reassurance to get investors lending to the Mediterranean nation but Greek bonds are now in their second week of declines, which has seen the yield on the 10-year security hit an 11-year high. As such, there has been growing speculation in the last few days that the bailout package agreed by eurozone members and the IMF—which did not go as far as naming amounts or interest rates—may be renegotiated.
While the UK benchmark index lost almost 1.0% on Thursday, the FTSE Greece Index plummeted another 4.6%.
Here in the UK, the National Institute of Economic and Social Research said the British economy maintained momentum in the first quarter of 2010 at 0.4%, in line with the expansion seen in the final quarter of 2009. There was also some positive data from the manufacturing industry, where factory output jumped 1.3% to 90.1 in February, according to the Office for National Statistics, while UK house prices increased at their fastest pace in well over two years on March—rising almost 7% year-on-year, Halifax reported.
These reports failed to prevent the UK’s blue chip index from falling into the red, however, as did a strong performance from national carrier British Airways. The airline topped the FTSE 100 leaderboard with a climb of 2.9% after finally signing a definitive merger agreement with Iberia, which has also gained the support of the UK union Unite. The merger isn’t expected to complete until the end of the year and BA’s pension deficit still presents a hurdle but, if successful, should lead to annual synergies of EUR 400 million.
Besides BA, only 14 FTSE 100-listed stocks managed to remain out of the red. Commodity plays and financial stocks featured heavily amongst the greatest casualties amid concerns the economic recovery could still falter. Miners Xstrata and Eurasian Natural Resources dropped 3.8% and 3.2%, respectively, while banks Lloyds Banking Group and Royal Bank of Scotland lost 3.0% and 1.5%.
Food and clothing retailer Marks & Spencer Group was also under the cosh, 2.8% weaker by close of play, as investors sought to take profits on the back of a stronger-than-expected trading update and guidance upgrade. Charles Stanley analyst Sam Hart expects the shares to remain range bound until the uncertainties presented by the post-election budget and the arrival of Marc Bolland as chief executive on May 1 are concluded.
