Euro pressure bears down on Footsie

LONDON FTSE 100 CLOSE 5,835.89 -112.60

The London market slipped to its lowest level since the end of March yesterday after fresh fears over the eurozone debt crisis rattled investor confidence.

The FTSE 100 Index fell by 112.6 points, or 1.9 per cent, to 5,835.89 after world markets were spooked by a credit rating downgrade for Italy and renewed speculation that Greece will have to restructure its debts.

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David Jones, chief market strategist at IG Index, said: "The market has been beaten up by plenty of bad news. European sovereign debt is firmly back on the agenda with the Spanish election backlash over the weekend and S&P's caution towards its Italy outlook just adding to the woes caused by Greece in recent weeks.

"The morning's preliminary Chinese PMI data showing a slide to a ten-month low has done nothing for confidence in the sustainability of the recovery."

The Dow Jones Industrial Average also dropped more than 1 per cent in early trading as US investors braced themselves for further evidence later this week that American consumer demand may be weakening.

The pound was down against a resurgent dollar at $1.61, but was flat against the euro at €1.15.

The soft sentiment saw commodity prices slide as Brent crude oil fell more than 2 per cent and some metal prices also dropped.

Mining was one of the hardest hit sectors in London after a strengthening in the US dollar made commodities more expensive for investors with other currencies.

Stocks under pressure included Anglo American, which declined 4 per cent or 121p to 2,830.5p, while Antofagasta eased 47p to 1,160p.

Commodities trader Glencore, which is due to begin full market trading today, dropped to 514p during the latest session for conditional dealings, having made its "grey market" debut at 540p last Thursday.

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New York-listed crude oil was below the $97 a barrel mark, triggering a difficult day for the likes of Royal Dutch Shell, which dropped 51p to 2,099p.

In a session when only two top-flight stocks made it on to the FTSE risers board, supermarket Morrisons was 2 per cent lower, down 10p to 298.3p, after it was reported to be preparing a 1.5 billion swoop for food retailer Iceland.

The move would nearly triple the number of stores in the Morrisons estate and boost the chain's presence in south-east England.

Other fallers included plumbing and building supplies firm Wolseley after Deutsche Bank cut the stock to hold and said it was pessimistic about prospects in the new build market. Shares were 82p lower at 1,949p.

Travel firms were also weaker after fears that the ash cloud from an Icelandic volcano would cause disruption.BA owner International Consolidated Airlines Group fell 12.6p to 235p, while Thomson-owner Tui Travel was off 7.6p at 229.8p.

Among the Scottish firms, Irn-Bru maker AG Barr was down 26p to 1,369p after it said it was putting its prices up in the face of cost inflation.

FirstGroup was off 2.3p at 349.2p after broker Peel Hunt dropped its target price for the shares, saying its struggling American school bus arm could drag down future dividends.