Eurozone talks weighing on the City

THE Footsie lost ground yesterday as the markets digested the outcome of the previous day’s emergency summit between the leaders of France and Germany, which failed to ease fears over the eurozone crisis.

Traders were disappointed that French president Nicolas Sarkozy and German chancellor Angela Merkel did not give their backing to eurozone bonds to fix the current problems, instead calling for greater European integration and a bank transaction tax, which hit financial stocks.

The FTSE 100 index fell 26.03 points to close at 5,331.6 amid fears the measures suggested were insufficient to stop the eurozone debt crisis escalating.

The London market had been down by more than 1 per cent but clawed back some of its earlier losses after the Dow Jones Industrial Average in the US made a strong start, gaining more than 0.5 per cent in early trading.

Wall Street was boosted by results from retailers such as Target and Staples, which outweighed a rise in core factory gate inflation by 0.4 per cent in July, the biggest increase since January. The overall producer price index rose 0.2 per cent last month.

The pound initially fell on currency markets after the minutes of the Bank of England’s monetary policy committee meeting in August revealed all nine members were united in calling for interest rates to be kept at record lows of 0.5 per cent.

But sterling pushed back into positive territory in late trading, up at $1.66 against the dollar, and at €1.15 against the euro.

Financial stocks bore the brunt of the selling, led again by the banks. Barclays was down 7.7p at 174p, Royal Bank of Scotland dipped 1p at 24.8p, Lloyds Banking Group fell 0.4p at 32.8p, and HSBC was down 10.6p at 542p.

Edinburgh-based insurance and pensions giant Standard Life was the biggest faller in the FTSE 100, down 5.1 per cent or 10.9p to close at 201.5p.

Inter-dealer broker ICAP and London Stock Exchange were also down 16.5p and 24.5p to 428p and 846p respectively amid fears that a proposed tax on EU financial transactions could hit trading volumes.

Miners were among the biggest risers, benefiting from a rise in commodity prices and a positive mood on Wall Street.

Silver miner Fresnillo was the biggest climber, up 6 per cent, or 105p at 1,966p, while mining and energy firm Eurasian Natural Resources was up 23.5p at 655p.

Among the Scottish stocks, Edinburgh-based oil and gas producer and explorer Melrose Resources plunged 9.7 per cent or 18.75p to end the day at 174p after lowering next year’s production forecasts.

Private investor Andrew Burgess bought a further 60,000 shares in Fife-based shop fitter Havelock Europa, spending more than £10,000 at 16.86p a share to take his holding from 18.8 per cent to 19.1 per cent. Havelock was flat at 16.5p.

Will Hedden, sales trader at IG Index, warned of less trading in the weeks ahead,

He said: “‘Quiet August’ has returned this week, with lower volumes and lower volatility across London’s main market.

“The last two weeks in August can be as slow as Christmas and the best efforts of the eurozone crisis have still not injected the same vigour we saw in the first half of the month.”