Spain's borrowing crisis fuels eurozone debt fears
A rise in Spain’s borrowing costs today fuelled fears about the eurozone debt crisis and triggered a sell-off on world markets.
Spain’s borrowing costs rose close to 6%, reflecting worries the country will struggle to keep up with repayments on its debt mountain and could ultimately need a bailout.
The eurozone fears, combined with worries that the US will fail to maintain its recent strong growth, dragged the FTSE 100 Index down more than 2%, or 128.1 points to 5595.6, with banks among the biggest losers. The sell-off means £33.2bn was wiped off the value of London’s leading shares index.
European markets were depressed as investors got their first chance to react to disappointing jobs numbers in the US on Friday following the Easter break. The Dax in Germany and the Cac-40 were down more than 2.5%.
Although figures today showed US employers posted slightly more job openings and stepped up overall hiring in February, the Dow Jones Industrial Average was 0.7% lower as the London market closed after its fall of 1% on Monday night.
The pound was down against the dollar at 1.58 after the greenback was boosted by being seen as a safe haven. Sterling was also down against the euro at 1.21.
In London, the flight from risk was most intense among banking stocks after Barclays slipped 6%, or 13p to 206.3p, Royal Bank of Scotland fell 1.1p to 24.7p and Lloyds Banking Group declined 1.6p to 29.8p.
There was also a fall of 10.1p to 189.7p for car and aviation parts supplier GKN amid fears over the strength of demand from the powerhouse US and Asian economies.
Mining stocks struggled but Randgold Resources bucked the trend after it said its operations in Mali had been largely unaffected by the recent military coup there. Fears of disruption had caused a recent slump in its shares, but the stock was up by 5% or 270p to 5425p today.
In a quiet session for corporate news, holidays firm Thomas Cook jumped 13% after Monday’s confirmation that it was in advanced talks with lenders over extending its banking facilities through to 2015.
The prospect of more breathing space for the under-pressure tour operator helped shares rise 2.8p to 23.3p, although Panmure Gordon stockbrokers kept its sell rating and said the company’s underlying debt issues still remained.
Among the biggest fallers in the FTSE 250 Index was transport operator FirstGroup after broker Citigroup downgraded the stock from buy to neutral amid concerns over margins in its UK bus arm.
Shares were 15.4p lower at 198.5p, a fall of 7%.
The biggest Footsie risers were Randgold Resources up 270p at 5425p, British Sky Broadcasting ahead 18.5p at 654p, Severn Trent up 25p at 1532p, G4S ahead 3.5p at 273.1p.
The biggest Footsie fallers were Vedanta Resources down 80p at 1155p, Barclays off 13p at 206.3p, Kazakhmys down 53.5p at 853p and IMI off 52.5p at 923p.
