Worries over growth and Greek deal rock world markets

Share prices in London, France, Germany and Spain nosedive as jitters hit global dealing rooms

Global stock markets took a battering yesterday as Greece struggled to seal a €130bn (£108bn) bailout and investors took fright at more signs of faltering growth among the world's fastest-growing economies.

The rout sent London's FTSE 100 plunging 1.9 per cent to 5765.8 – its biggest one-day fall for more than two months – in a turbulent session for equity markets. Shares in France, Germany and Spain took even bigger punishment with falls of more than 3 per cent as jitters over global growth gripped dealing rooms and put Wall Street on the back foot.

London's blue-chip benchmark was in sight of the 6,000 mark less than two weeks ago, but mining and resource stocks were among the worst casualties amid mounting fears over fragile global demand. The miner Polymetal and steel giant Evraz both slumped more than 6 per cent, and the broad-based sell-off left just two Footsie stocks – the fund manager Hargreaves Lansdown and broadcaster BSkyB – in positive territory. Traders took fright as Brazilian growth slowed sharply from 7.5 per cent to 2.7 per cent last year. The disappointment came just a day after China, the world's second-biggest economy, scaled back its growth targets.

IG Index's sales trader Will Hedden said shares had been sent down by an "avalanche of pent-up selling pressure".

"With markets having spent so long near their post-crisis highs, it feels this time as if the leg downward has begun in earnest," he warned.

The sell-off came amid warnings from international bankers that the eurozone faces a disastrous €1trn blow if Greece is allowed to slide into a chaotic default.

The leaked doomsday scenario emerged from the Institute of International Finance (IIF), the body representing the banks and hedge-fund holders of Greek debt leading negotiations with Athens over the financial rescue.

It comes two days ahead of a crucial deadline for investors holding €206bn in Greek bonds to sign up to a swap cutting the value of their debt by around 75 per cent to ease the beleaguered nation's debts.

The memo warned of "very important and damaging ramifications" from a Greek default, including more bailouts for Portugal and Spain as well as €350bn pumped into Spain and Italy to prevent an even more catastrophic collapse. The European Central Bank – facing €177bn in losses on Greece – might also need to be recapitalised, it added.

But analysts said the timing of the leak smacked of an attempt by the IIF – whose 12 committee members holding 20 per cent of the bonds to be swapped have already signed up – to bring other heel-dragging investors into line. If the swap collapses, Greece will default when a €14.4bn bond repayment falls due on 20 March.

The CMC Markets analyst Michael Hewson said that the leaked document was simply a "big stick" to beat the banks and investors who have yet to sign up to the deal.

"Anybody who thinks this is the answer for Greece is living on another planet," he said. "The deal solely serves to promote vested interests in the banking sector, as hardly any money is going to help Greece's economy."

Ideally, Greece wants 90 per cent of investors to sign up to the swap, although the country's Finance Minister, Evangelos Venizelos, has set a 75 per cent threshold to go ahead with the deal. With between 75 per cent and 90 per cent taking part, Athens could also decide to press ahead, activating "collective action clauses" (CACs) to force recalcitrant investors to participate. Below 67 per cent would be a disaster as the CACs cannot be enforced, although unofficial estimates suggest participation in the low 70 per cent.

The Lloyds Bank Corporate Markets analyst Eric Wand said: "Our central scenario remains that Greece will not achieve the 90 per cent voluntary participation but it will meet the 66.67 per cent acceptance thresholds."

Start your day with The Independent, sign up for daily news emails
Barn owls are among species that could be affected
charity appeal
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas