WORLD markets were pegged back yesterday as they digested Standard & Poor’s warning that it could downgrade Europe’s multi-billion bail-out fund as well as the credit ratings of 15 eurozone countries.
S&P said it was putting the AAA long-term credit rating for the European Financial Stability Facility on watch with “negative implications”, and gave notice that it may cut 15 eurozone countries’ ratings, including Germany and France, as the region’s crisis rumbles on.
Colin Cieszynski, market analyst at CMC Markets, said it made for a mixed day for markets around the globe.
“While traders have become more encouraged about the prospects of a breakthrough toward resolving the European debt crisis in the last week, the credit warning from S&P reminds everyone that the stakes remain very high,” he said.
The mood on the continent has been more upbeat in recent days, ahead of a crucial summit in Brussels on Friday, when it is hoped a concrete solution to the problems in Europe will be delivered. Hopes for success were lifted after French president Nicolas Sarkozy and German chancellor Angela Merkel said eurozone nations should face greater checks on their finances and sanctions for deficits.
In London, the FTSE 100 Index finished less than one point higher at 5,568.72. The euro took the downgrade threat in its stride, with the pound slipping to €1.16. Sterling was little changed against the US dollar at $1.56.
Banking stocks were on track for a strong session until S&P’s announcement on the bail-out fund limited the rise at taxpayer-backed Lloyds Banking Group to 0.1p to 27.1p, while Royal Bank of Scotland was 0.2p lower at 22.6p. HSBC was 9.7p weaker at 508.3p after broker Seymour Pierce expressed disappointment that the bank had been the subject of a mis-selling fine from the FSA on Monday.
In a thin session for corporate news, building supplies firm Wolseley topped the FTSE 100 risers’ board after a first-quarter trading update showed a 16 per cent rise in trading profits to £185 million.
While UK profits were down 20 per cent, Wolseley benefited from a 10 per cent rise in like-for-like revenues at its US division. Shares were 69p higher at 1,972p.
It was a disappointing session for retailers after industry figures fuelled concerns about prospects over the Christmas trading season.
The British Retail Consortium said like-for-like sales were down 1.6 per cent in November during the worst month for the sector since May.
Marks & Spencer shares were off 14.1p at 314.9p, Next dropped 85p to 2,575p and Argos-owner Home Retail Group fell 8.65p to 92.25p in the FTSE 250 Index.
Among the Scottish stocks, Cairn Energy’s confirmation that the sale of part of its Indian offshoot to mining giant Vedanta had received the green light didn’t lift its shares, which closed 3.5p lower at 274.5p.
And insulation manufacturer Superglass failed to excite the market after announcing £6.5m of investment in its Stirling factory. Its shares, trading at an adjusted price following the firm’s restructuring last week, lost 0.75p to 25.75p.