Markets: Footsie slips as Italy debt relief fades

The FTSE started the day on the front foot after it was revealed that debt-ridden Italy had managed to borrow money on a medium-term basis at a significantly lower cost than last month.

Despite the initial optimism, however, fears began to grow ahead of today’s auction of longer-term bonds, and Italy’s ten-year borrowing costs soared back above 7 per cent in afternoon trading.

Analysts resumed their warnings that the eurozone crisis was far from over. Nicholas Spiro of Spiro Sovereign Strategy said: “The odds are that the eurozone crisis will intensify in the coming months and that Italy will remain the focal point for investor anxiety.”

The FTSE closed the session down 5 points, or 0.10 per cent, at 5,507.4 despite advancing almost 1 per cent earlier in the day. Italian debt fears also saw Wall Street open lower while France’s Cac-40 was down 0.7 per cent and Germany’s Dax shed 2 per cent.

ITV was among the FTSE’s biggest risers despite suggestions that it had lost the Christmas Day ratings war with the BBC. ITV shares gained 2 per cent, or 1.1p, to close at 65.5p.

A string of retailers enjoyed better trading on the back of reports that shoppers were flocking to the high street to bag a bargain during the sales. Tesco was up 8.8p at 399.8p, Argos owner Home Retail Group rose 4p to 86.8p, Halfords was 7.7p higher at 296.4p and Debenhams closed up 0.9p at 57.5p.

It was a bad day for the banks, however, which found themselves among the FTSE 100’s biggest fallers amid thin trading volumes. Lloyds was down and Royal Bank of Scotland was 0.7p lower at 19.9p.

NEW YORK

US stocks fell more than 1 per cent as the S&P 500 erased gains for the year on renewed concerns about the euro zone’s financial health.

The selloff followed the euro’s slide to an 11-month low against the dollar.

The Dow Jones Industrial Average fell 139.94 points, or 1.1 per cent, to 12,151.41. The S&P 500 dropped 15.79 points, or 1.3 per cent, to 1,249.64.