French downgrade rumours hit shares

Reports that Standard & Poor’s will strip France of its AAA credit rating drove falls on world markets yesterday.

The ratings agency was widely expected to downgrade France and Austria in a move that would leave just four of the 17 nations in the eurozone with a top notch credit rating.

Chris Beauchamp, market analyst at IG Index, said: “Usually rumours of a downgrade of France are accompanied by frantic denunciations from Paris, but these have been strangely absent. As a result, people have begun to assume that France’s AAA rating has met its Waterloo.”

With rumours that talks on restructuring Greece’s debt have collapsed adding to the gloom, the FTSE 100 Index surrendered morning gains to fall 25.78 points or 0.5 per cent to 5,636.64. Germany’s Dax and France’s Cac-40 were also in negative territory.

Despite the euro gloom, Royal Bank of Scotland topped the FTSE 100 risers’ board for the second day running as investors approved of its plans to cut 3,500 jobs as part of a restructuring of its investment arm, which prompted broker Seymour Pierce to upgrade the stock.

Shares in the state-controlled bank had been up by as much as 8 per cent earlier in the day, but gains were reduced to 5 per cent by the close, up 1.1p to 24.1p. Barclays was ahead 7.8p at 201.2p, HSBC was up 5.1p to 504.7p, and Lloyds was 0.4p higher at 29.5p.

Scottish dairy group Robert Wiseman was the biggest mover on the whole market, with shares gaining more than a third in value after it confirmed it had become a takeover target.

The East Kilbride-based company is in talks with German yoghurt giant Müller regarding a possible cash offer. Shares leapt 84p to 328p.

NEW YORK: Wall Street dropped last night, snapping a four-day winning streak, after news reports that Standard & Poor’s would downgrade credit ratings on several eurozone countries.

The Dow Jones industrial average was down 49.72 points, or 0.40 per cent, to close at 12,421.30 while the broader Standard & Poor’s 500 Index was down 6.39 points, or 0.49 per cent, at 1,289.11. The Nasdaq Composite Index closed down 13.76 points, or 0.51 per cent, at 2,710.94.