Banking shares fall over Greek euro fears


Nervous traders wiped £28.5 billion from the value of London's leading shares index today as fears intensified that Greece will crash out of the euro.

The FTSE 100 Index fell 2%, or 110 points to 5465.5 after Greek President Karolos Papoulias was unable broker a deal as the anti-bailout party Radical Left Coalition party refused to join a coalition government.

That left the country facing the prospect of another election next month, putting its future in the eurozone in increasing doubt.

The uncertainty, which analysts said could ultimately lead to Greece leaving the single currency, hit financial stocks as banks and insurers dragged London's leading shares index to a fresh low for 2012.

The FTSE 100 Index saw £28.5 billion wiped from its value, while the Dax in Germany and the Cac-40 in France were down about 2% and Wall Street's Dow Jones Industrial Average was 0.7% lower as the London market closed.

The pound rose on currency markets after being seen as a safe haven. It was up at 1.25 against the euro, which was hit by the fears over Greece, and up at 1.61 against the dollar.

Greek president Karolos Papoulias has failed to broker a deal, while the Radical Left Coalition party, known as Syriza, which came in a surprising second in the May 6 vote, has refused to join a coalition government that backs tough austerity measures.

A failure to enforce more austerity measures will likely see Greece, which is in its fifth year of recession, default on its debts and be ejected from the single currency.

Investors said that another election next month would effectively be a referendum on whether to stay in the euro and stomach more painful austerity measures.

Matthew Nelson, sales trader at Spreadex, said: "Pretty much all the market focus at present is on Greece's attempts to form a coalition government and investors and spread bettors alike seem to be pricing in an exit for the tormented sovereign."

The pound rose on currency markets today as it is seen as a safe haven, while the euro declined in value. The pound now buys 1.25 euros, which is good news for UK holiday makers heading to the currency bloc but bad news for businesses that rely on exports to Europe.

The UK's safe haven status saw its borrowing costs tumble to a record low at times today. Germany and the US benefited from the same trend, while Spain and Italy's cost rose because they were seen as increasingly risky.

Chris Beauchamp, market analyst at IG Index, said: "Uncertainty is driving markets at present, with the main fear being that Greece will leave the eurozone.

"It has been a day of relatively little news but that has not stopped a widespread rout on indices, as traders abandon markets for the safety of the US dollar and government bonds.

"It seems almost certain that the Greek problem will remain the centre of attention for the rest of the week, with all other news subsumed into the general morass of worry."

Barclays was the biggest faller, down 6% or 13p at 189.8p, while Royal Bank of Scotland dropped 1.1p to 21.9p, and Lloyds Banking Group shed 1.7p at 29.4p.

Investment firm Man Group continued to tumble, falling 6% or 4.9p to 83p. The company has seen its shares slide by about two-thirds in the last 12 months.

The mining sector suffered heavy losses as Greek fears were compounded by concerns over China's growth, after reports that the country had cut its reserve requirement ratio - the amount of cash banks are required to hold as reserves. Eurasian Natural Resources dropped 23.7p at 492.8p.

Severn Trent was near the top of a shortened risers board, boosted by its safe-haven investment status. Shares were 11p ahead at 1704p.

Outside the top flight, shares in Mecca Bingo owner Rank rose 6% after it unveiled a proposed £205 million deal with Gala Coral.

The proposed takeover of Gala's 23 casinos will give Rank's Grosvenor division 58 UK sites - taking it above Malaysian firm Genting, which has 45 locations including Crockfords casino in London's Mayfair. Shares were 6.8p ahead at 123.5p.

Thomas Cook's warning that it is in danger of collapse if shareholders fail to back two planned disposals wiped 11% from its share price.

Its warning came as one analyst said the recent poor performance of its shares, which have slumped 90% over the past 18 months, showed the City believes there is a one in three chance of it failing.

The tour operator posted documents to shareholders over the weekend in which it explained the financial importance of the planned sale and leaseback of part of its aircraft fleet and the disposal of five Spanish hotels. Shares fell 2.3p to 19p.

The biggest Footsie risers were Sage up 3.8p at 265.5p, Severn Trent ahead 11p at 1704p, Intertek up 6p at 2478p, and International Power ahead 0.4p at 419.4p.

The biggest Footsie fallers were Barclays down 13p at 189.8p, Aberdeen Asset Management off 14.7p at 246.3p, Man Group down 4.9p at 83p, and Lloyds Banking Group off 1.7p at 29.4p.


Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own