Greek tragedy drags the FTSE down

FEARS that Greece could default on its debts pushed the Footsie lower yesterday, although stronger economic data from the US helped it recover some of its earlier losses.

The FTSE 100 index sunk to near a two-and-a-half month low, shedding almost 100 points following reports that the situation in Greece could cause a continent-wide debt crisis.

But it had regained some of those losses by the close, leaving it down 43.74 points or 0.8 per cent at 5,698.81, after the Dow Jones Industrial Average made gains of 0.6 per cent in early trading, buoyed by better-than-expected unemployment and construction data.

The mood of investors was also slightly improved in the afternoon by comments from Olli Rehn, the European Union's monetary affairs commissioner, that Greece was likely to get its next instalment of €12 billion (10.6bn) from the rescue package agreed last year.

The eurozone crisis saw the single currency plunge against all major currencies, standing at €1.14 against the pound. Sterling fell to $1.61 against the dollar.

Will Hedden, sales trader at IG Index, said: "The Greece crisis has refused to go away, prompting another day of red for UK equities. A relief rally on Wall Street stopped the FTSE 100's fall turning into a real hiding."

Among the Scottish stocks, Edinburgh-based oil and gas explorer Cairn Energy fell 7.6p to 403.3p after a major boardroom reshuffle that will see chief executive Sir Bill Gammell become chairman.

Concern over Greece's plight was most keenly felt across the heavyweight banking and commodity sectors.

Chancellor George Osborne's speech on Wednesday night - which confirmed plans to ringfence investment banking and high street operations - added to the sector's unease.

Barclays fell 3.4p to 254p and Royal Bank of Scotland dropped 0.5p to 40.3p.

The retail sector came under pressure after official figures revealed a worst-than-expected 1.4 per cent slump in sales volumes in May. A hangover from the previous month's royal wedding, Easter and run of bank holidays hit the industry, with food stores registering the first decline in volumes for 14 months.

Blue-chip retailers fell, with Next down 36p at 2,196p and B&Q-owner Kingfisher dropping 4.1p at 268p.

Commodities trader Glencore perked up near the end of the session to add 2.8p to 475.8p having been much lower earlier in the day, though it still remains well below its 530p flotation price. The company has been under pressure this week when it rejected speculation of a potential takeover of miner Eurasian Natural Resources Corporation (ENRC).

The eurozone woes fuelled further concerns over the wider global recovery, which saw the mining sector come under pressure.Copper giant Kazakhmys led the sector, down 42p at 1,240p, with platinum group Lonmin off 49p at 1,382p and ENRC slipping 21p to 723p.

Outside the top flight, luxury handbags maker Mulberry posted one of London's best performances as it continued to defy the economic downturn with a sharp jump in annual profits. Shares closed 9 per cent or 115p higher at 1,450p.