Fears of debt contagion hit shares

OIL giant BP managed to halt the decline in its share price yesterday despite a market-wide sell-off as Greek's debt woes continued to send shudders through global stock markets.

BP finished higher as analysts said the recent falls in the wake of the Gulf of Mexico oil spill looked overdone, helping shares gain 6.5p to 565p. The firm has made progress with dealing with the leak on the seabed.

But the FTSE 100 Index fell 69.18 points – or 1.3 per cent – to 5,341.93 as fears of Greece's debt crisis spreading to other countries refused to die away.

The Cac 40 in France and Germany's Dax fell 1.3 per cent and 0.8 per cent respectively, although America's Dow Jones Industrial Average steadied after losing 1 per cent early on.

Worries remain over Greece's ability to deliver on austerity measures in return for the weekend's 110 billion (95bn) bailout, with mass protests in Athens yesterday.

Ratings agency Moody's warned that it may downgrade Portugal in the next three months, a week after rival agency Standard & Poor's cut its rating and stoked market concerns that the Greek crisis was spreading through the eurozone.

The euro plummeted to its lowest level against the dollar for more than a year at 1.28, while the pound was a beneficiary of the single currency's weakness as it strengthened to almost 1.18 at one point.

Sterling was steady at around $1.51 against the dollar.

David Jones, a market analyst at IG Index, said: "Markets seem to be trading on the assumption that Greece is merely the canary in the coal mine, and that fiscal contagion is now inevitable."

David Morrison, a market strategist at GFT Global, added: "There was a feeling that markets were desperately trying to find a foothold early on, but the eurozone debt concerns just won't go away and they have turned the tide lower once more."

Among the handful of risers on the London market were silver miner Fresnillo and BHP Billiton, up 43.5p to 807p and 21p to 1,886p respectively.

But other heavyweight commodities stocks continued their recent steep decline in a mixed session for the sector, led by Kazakhmys as the leading Footsie faller. Shares were down 61p at 1,239p.

Financial shares tumbled on to the fallers board, with Lloyds Banking Group off 2 per cent – or 1.14p at 60.1p – while Royal Bank of Scotland fell 0.35p to 50.4p.

In corporate news, Next lost 76p at 2,181p – despite saying it was on track to grow sales and profits this year. The retailer said it remained "very cautious".

Fellow high street retailer Marks & Spencer shed 2.7 per cent to close down 9.6p at 351.2p after it was announced that chief financial officer Ian Dyson will replace Giles Thorley as chief executive at Punch Taverns. Punch closed down 0.4p at 85p.

Rival pubs group JD Wetherspoon was almost 10 per cent lower, down 51.7p at 491.8p, as it forecast a gloomier outlook and revealed sales had deteriorated in the past three months.

A number of stocks were also in the red as they turned ex-dividend, meaning new investors will not take part in the next shareholder payout. This left supermarket chain Morrisons down 10.5p at 278.8p.