The FTSE 100 index hit a 5-month low yesterday as it ended a fifth successive week of losses, while disruption in Greece signalled there could be more turmoil ahead.
After a dramatic 3 per cent plunge on the blue-chip index on Thursday – the worst day for one-and-a-half years – the FTSE closed down 0.7 per cent at 6,116.17, a level not seen since January.
The five-week string of losses was the longest downhill run for almost two years. Between May and June 2011, the FTSE equalled the current bad run as concerns grew over a catastrophic default by Spain and Italy.
There are signs that a new eurozone crisis could now be looming, with the survival of Greece’s coalition government hanging in the balance.
Greek bonds climbed sharply yesterday after the country’s Democratic Left party said it would pull out of the coalition government amid a row over the closure of the country’s equivalent of the BBC.
The party was angry after not being consulted over the closure of national broadcaster ERT last week to save money.
Without the support of the Democratic Left, the two remaining coalition parties have a majority of just three seats. The political uncertainty has added to existing fears in the global markets.
Investors were spooked earlier this week by hints from the US Federal Reserve that it may end its asset purchasing programme as early as the middle of next year.
David Jones, chief market strategist at spread-betting firm IG, said: “ECB president Mario Draghi calmed markets last summer when he said he would do whatever it takes to save the euro but, with the Fed in the background, we may see a summer more like 2011.”