Debt woes trigger FTSE losses
Monday 23 May 2011
Eurozone debt woes and fears over low consumer demand in the United States triggered big losses for the London stock market today.
The FTSE 100 Index fell more than 1.5% to levels seen at the end of March after two key agencies downgraded the credit rating for Greece and outlook for Italy.
Investors were also fearful that a key indicator of consumer demand will highlight weakness in the US economy.
The soft sentiment saw commodity prices slide as Brent crude oil fell more than 2% and metal prices also dropped.
The hardest hit sector was mining stocks - as a weak global recovery could hit demand for resources - but banking shares, including Barclays and Lloyds Banking Group, also came under pressure.
Elsewhere, concerns over the potential impact of a volcanic eruption in Iceland hit travel stocks such as Thomson Holidays owner TUI Travel and British Airways parent International Airlines Group (IAG).
The problems in the eurozone were brought back into focus over the weekend after agency Fitch cut Greece's credit rating three notches further into junk status.
The country was the first to accept a multi-million pound bailout from the EU and IMF and has come under increasing pressure to step up the pace of its economic reform.
Credit rating agency Standard & Poor's then hit confidence as it downgraded its outlook for Italy to negative from stable.
S&P said the greatest concern was that the problems in Greece would spread to other nations - a scenario dubbed "debt contagion" by economists.
A US Commerce Department report is expected to show that consumer spending in the world's biggest economy slowed in April as higher food and fuel prices forced Americans to cut back on other items.
Travel stocks took a hit after the Grimsvotn volcano in Iceland experienced its largest eruption in 100 years and meteorologists warned the ash cloud could drift over to the UK later this week.
The latest emission comes a year after the Eyjafjallajokull eruption sent clouds of ash across Europe, closing airspace and grounding flights.
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