Crumbling cliff face worries the City

L0NDON traders awoke yesterday to news that an agreement to secure the finances of the world’s largest economy had crumbled in the face of opposition from across the political spectrum.

The FTSE 100 Index was down 18.4 points at 5,940 in thin trading volumes, which contributed to a volatile session.

Angus Campbell, head of market analysis, Capital Spreads, said: “The FTSE dipped below 5,900 briefly and it looked as if Father Christmas had well and truly crashed his sleigh in the snow, but gradually investors have seen that the panic selling may have been overdone and the markets have recovered from their earlier lows.”

Evraz led the fallers as the spectre of the US “fiscal cliff” threatened the world economic recovery on which commodity stocks depend. It fell 3 per cent, off 9.2p to 257.8p. Banking firms were also hit with Barclays shares down 3.8p to 263p and Lloyds losing 0.9p to 48.3p.

BAE Systems was also suffering despite the confirmation of a £2.5 billion deal to sell 20 aircraft to Oman, which was higher than expected by many analysts. Shares were 1.9p lower at 346.1p.

But utility stocks were on the rise after regulator Ofwat announced significant changes to the next price review process in 2014. Severn Trent was the biggest gainer in the sector, up 41p to 1,610p, while South West Water-parent Pennon added 2p to 634p.

Shares in Faroe Petroleum added 1.5p to 136.5p after the Aberdeen-based oil and gas explorer agreed a new loan package with its banks to support its growth plans in Norway. And Petroceltic was up 0.1p at 6.6p after the Algerian authorities approved its plans to develop a gas field in the north African country.

NEW YORK: Wall Street finished lower last night, after a Republican plan to avoid the “fiscal cliff” had failed to gain sufficient support on Thursday night, draining hopes that a deal would be reached before 2013.

The Dow Jones Industrial Average fell 120.88 points or 0.91 per cent, to end the day at 13,190.84 while the Standard & Poor’s 500 Index lost 13.54 points or 0.94 per cent, to finish at 1,430.15. The Nasdaq Composite dropped 29.38 points or 0.96 per cent, to close at 3,021.01.