Fears return over Greeks bearing debt

LONDON FTSE 100 CLOSE 5,723.43 -60.26

LONDON'S Footsie relapsed into the red yesterday as it surrendered Tuesday's gains due to persistent fears over Greece's debts.

Early increases for airline and travel stocks after the UK's airspace reopened following the volcanic ash cloud proved short-lived as the FTSE 100 closed 60.26 points, or just over 1 per cent, lower at 5,723.43.

Indices across Europe also fell on the back of the Greek concerns, with the Cac 40 in France down 0.9 per cent and Germany's Dax off 0.5 per cent.

The debt-laden Greek government began detailed talks over a financial bailout as its borrowing costs reached a record high and the International Monetary Fund said the woes could cast a cloud over European recovery.

Nick Serff, market analyst at City Index, said: "The market is clearly still feeling a bit jittery about the Greece debt situation, particularly with Greece talking to the EU and IMF today regarding the economic plan.

"We have seen further selling of the euro, with Greek bond yields continuing to blow out, emphasising the nervousness that remains regarding the eurozone outlook."

As the Greek debt issue hung over the European currency, the pound rose to 1.15 against the euro and climbed to $1.53 against the dollar.

On the FTSE 100, pressure in the mining sector came after traders continued to fret about demand prospects and heavyweight firm BHP Billiton disappointed analysts with its latest production figures.

BHP fell 62p to 2,118p, while many players lost ground after turning ex-dividend, including Xstrata, off 52p to 1,165p.

Retailers weighed on the index after Marks & Spencer shares were downgraded by Bank of America and investors worried that Tuesday's surprisingly large hike in inflation raised the risk of a move up in interest rates, which could hit consumers' pockets. M&S shares were down 11.5p to 376.1p.

Elsewhere in the sector, shares in FTSE 250 Index constituent Game Group slumped by 12 per cent after it posted a 27 per cent fall in full-year profits and announced the departure of chief executive Lisa Morgan.

With trading conditions remaining tough, Game shares fell 12.1p to 89.3p and dragged rival HMV down by 4.4p to 80.6p.

Other ex-divi stocks meanwhile added to the pressure on London's Footsie, led by defence firm BAE Systems, which fell 18.6p to 358.8p.

Travel-related shares struggled to make headway despite the resumption of flying. BA lost an earlier gain to stand 0.4p lower at 233.5p, while EasyJet added 4.5p to 484p. TUI Travel, which owns Thomson holidays, was off 0.3p to 288.9p.

The biggest rise in the FTSE 100 Index came from chip designer ARM Holdings after strong results from technology giant Apple, one of its clients.

ARM, whose chip designs are used in a raft of devices such as mobile phones and MP3 players, rose more than 3 per cent – up 7.5p to 250.5p – after Apple surpassed Wall Street hopes with second-quarter figures.

Among the Scottish stocks, Livingston-based software firm Craneware climbed 2.4 per cent, or 9.5p, to end the day at 414.5p after signing a reseller deal in the US which will bring in more than $15 million (9.7m).